• Recently, the Reserve Bank of India (RBI) released the 23rd issue of its Financial Stability Report (FSR).
  • The FSR which is published biannually reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC – headed by the Governor of RBI) on risks to financial stability and the resilience of the financial system.
  • The Report also discusses issues relating to development and regulation of the financial sector.

Important points:

  • The impact of the Covid-19 Second-Wave on the balance sheets of Indian banks has been less than what was projected before and capital buffers are reasonably resilient to withstand future shocks.
  • A capital buffer is required reserves held by financial institutions put in place by regulators. These are designed to provide banking organizations with the means to support the economy in adverse situations.
  • Covid-19 Second-Wave has dented economic activity, but monetary, regulatory and fiscal policy measures have helped curtail the solvency risk of financial entities, stabilise markets, and maintain financial stability.
  • Solvency risk is the risk of being unable to absorb losses, generated by all types of risks, with the available capital.

Global Recovery:

  • Sustained policy support, benign financial conditions and the gathering momentum of vaccinations are nurturing an uneven global recovery.
  • Policy support has helped in shoring up financial positions of banks, containing non-performing loans and maintaining solvency and liquidity globally.


  • Banks have managed to capitalise themselves well during 2020-21 aiding them in maintaining adequate capital adequacy even under stress situations.
  • The Capital to Risk-Weighted Assets Ratio (CRAR) of SCBs increased to 16.03% and the Provisioning Coverage Ratio (PCR) stood at 68.86% in March 2021.
  • During 2020-21 the RBI had introduced a one-time restructuring scheme to aid borrowers affected by the Covid-19 pandemic.
  • The scheme was to be invoked by December 2020 and implemented within 90 days for retail borrowers and 180 days for corporate borrowers.
  • By March 2021, 0.9% of total bank advances (loans) were under restructuring.
  • MSMEs had the highest restructure ratio at 1.7%.
  • Corporate borrowers had a restructured ratio of 0.9% of total advances.
  • 7% of total retail advances were restructured.


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