RBI Financial Stability Report June 2023 - Key Highlights: ICICI Securities 03/07/23, 9:33 AM

RBI Financial Stability Report June

2023 - Key Highlights: ICICI
Securities
Since the last issue of the FSR in Dec 22, the global,
Indian financial systems have charted somewhat
different trajectories.
ICICI Securities

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The Reserve Bank of India’s six-monthly Financial Stability Report

reiterates our systemic view that Indian banks’ balance sheet strength is
strong and is likely to remain so. The report mentions that both banking
and corporate sectors’ balance sheets have been strengthened,
engendering a ‘twin balance sheet advantage’ for growth.

The common equity tier and capital-to-risk weighted assets ratio of

scheduled commercial banks, as of FY23, are at historical highs of 13.9%
and 17.1%, respectively.

Gross non-performing assets have come down to their lowest level in the
past 10 years to 3.9% and the base line projections by the RBI indicate
further improvement to 3.6% by FY24 end. This goes in line with our
thesis of stable to improving gross slippages for the system and benign
credit cost during FY23-25.

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RBI Financial Stability Report June 2023 - Key Highlights: ICICI Securities 03/07/23, 9:33 AM

The report also highlights contained and improving trends on systemic

special mention account loans. It gives encouraging picture on three key
segments – unsecured retail, micro, small and medium enterprise and
Emergency Credit Line Guarantee Scheme portfolio, where the
predictability of asset quality outcome is still lower, in our view.

Unsecured retail loans formed only 7.9% of total banking system credit. Its
asset quality has improved, with GNPA ratio declining from 3.2% in FY21
to 2.0% in FY23. The SMA 1+2 share has been contained at 1.1% for
private banks and 3.1% for public sector banks though SMA 0 share
appears bit elevated at 2.9% for private banks and 6.8% for PSBs.

Thus, RBI notes that notwithstanding a few signs of potential stress in

retail loans, they do not pose an imminent risk to systemic stability. MSME
GNPAs have improved sharply from 9.3% in FY22 to 6.8% with
improvement in below Rs 250 million ticket size as well.

On ECLGS, RBI notes total delinquency has been 5.5% of total disbursed
amount, which in our view is very comfortable.

Click on the attachment to read the full report:

ICICI Securities Banking RBI FSR June 2023.pdf

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This report is authored by an external party. BQ Prime does not vouch for
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contents of this section do not constitute investment advice. For that you
must always consult an expert based on your individual needs. The views
expressed in the report are that of the author entity and do not represent

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RBI Financial Stability Report June 2023 - Key Highlights: ICICI Securities 03/07/23, 9:33 AM

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