Govt plans stress test of banks: Report
India's mainly state-controlled banks fared well during the global financial crisis despite a widespread liquidity squeeze.
By Agencies |
MUMBAI: Government plans to stage "stress tests" twice a year on its banks following the lead of US and European financial regulators, a report said on Wednesday.
The central bank said on Tuesday it had carried out rudimentary tests during the worldwide financial slump to monitor credit and interest rate risks, according to the Financial Times.
But the Reserve Bank of India said it would carry out more sophisticated tests to build up confidence in the country's banking network, which largely weathered the global financial crisis.
The newspaper quoted bank governor Duvvuri Subbarao as saying India was "learning on the job" in its review of capital, liquidity and other standards.
A central bank spokesman could not be immediately reached for comment on the report.
India needed to have more rigorous stress tests, in which bank balance sheets are checked to see how much financial pressure they can withstand in a simulated future crisis, the governor was quoted as saying.
The comments come days after Europe released the results of stress tests of the region's leading financial institutions.
The London-based Committee of European Banking Supervisors announced last Friday that seven of the 91 European Union institutions examined had failed the tests designed to assess the capacity to withstand financial crises.
India's mainly state-controlled banks fared well during the global financial crisis despite a widespread liquidity squeeze.
Only ICICI, the nation's largest private sector bank, required explicit liquidity support from the central bank during the downturn.
The government also borrowed from the World Bank to inject capital into some smaller state-owned banks.
The United States conducted stress tests in 2009 in which 10 of the nation's largest 19 banks were found to need a combined 75 billion dollars of extra funds to boost their cash reserves to absorb further losses.
The central bank said on Tuesday it had carried out rudimentary tests during the worldwide financial slump to monitor credit and interest rate risks, according to the Financial Times.
But the Reserve Bank of India said it would carry out more sophisticated tests to build up confidence in the country's banking network, which largely weathered the global financial crisis.
The newspaper quoted bank governor Duvvuri Subbarao as saying India was "learning on the job" in its review of capital, liquidity and other standards.
A central bank spokesman could not be immediately reached for comment on the report.
India needed to have more rigorous stress tests, in which bank balance sheets are checked to see how much financial pressure they can withstand in a simulated future crisis, the governor was quoted as saying.
ADVERTISEMENT
The comments come days after Europe released the results of stress tests of the region's leading financial institutions.
The London-based Committee of European Banking Supervisors announced last Friday that seven of the 91 European Union institutions examined had failed the tests designed to assess the capacity to withstand financial crises.
India's mainly state-controlled banks fared well during the global financial crisis despite a widespread liquidity squeeze.
ADVERTISEMENT
Only ICICI, the nation's largest private sector bank, required explicit liquidity support from the central bank during the downturn.
The government also borrowed from the World Bank to inject capital into some smaller state-owned banks.
ADVERTISEMENT
The United States conducted stress tests in 2009 in which 10 of the nation's largest 19 banks were found to need a combined 75 billion dollars of extra funds to boost their cash reserves to absorb further losses.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
Related Articles
RBI Governor asks banks to treat MSMEs as growth partnersPoll
ADVERTISEMENT
