“Thus additional focus has to be on strengthening the internal governance framework of financial entities and observance of market discipline.”Under severe stress conditions, gross bad loans of all banks will jump to 11.2% of the total in March 2018, from 10.1% in September 17. State run banks are likely to be hit more, it said.“The banking stability indicator (BSI) worsened between September 2016 and March 2017,’’ the report said. The most severe shock would completely wipe out the recorded profits of the last fiscal.Big borrowers continued to be a troubled spot for the banking system as their ability to meet payments commitment is deteriorating. Large borrowers account for 56% of gross loans and 86.5% of bad loans, and the top 100 large exposures account for a quarter of all bad loans, and 15.2% of gross advances. “The transition of credit intermediation from the banking sector to the non-banking sector though welcome, calls for increased monitoring and prudential regulation," the report said.

Source: Economic Times June 30, 2017 14:38 UTC