RBI survey cites major bank risks

MUMBAI: Weak asset quality of banks, risk on account of capital requirement, credit growth and cyber risks were perceived as high risk factors for financial institutions by market participants in the latest systemic risk survey (SRS) conducted by the Reserve Bank during October-November 2017. According to the survey, global risks were perceived as medium risks affecting the financial system.

While geo-political risk continued to be on the watch list of market participants across segments, they believe that the evolving US trade and tax policy outlook and swings in global commodity prices could trigger correction in the domestic equity markets and volatility in the foreign exchange market. Most participants feel that while the pace of Insolvency and Bankruptcy code in resolving the bad assets in the Indian banking system has picked up, the final outcome and the level of haircut is critical to resolve the asset impairment crisis and improve the confidence.

Majority participants also felt that the possibility of a high impact event occurring in the global financial system and the Indian financial system in the short term (upto 1 year) as well as in the medium term (upto 3 year) is medium. However, close to half of the participants assigned a medium probability to the occurrence of a high impact event occurring in the domestic financial system in the medium term.

On the issue of likely changes in demand for credit in the next three months, the majority of the respondents were of the view that it will remain unchanged. A majority of the respondents also indicated that the average quality of credit would remain unchanged in the next three months.