Asset Aquability Of A Bank : Asset Quality Of The Banking

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ASSET QUALITY OF THE BANKS: As per the RBI the banking system in India is self-sufficient & is well funded. The asset quality of the banks is however a concern. Assets of the bank are largely loans such as mortgages, government bonds & cash. A healthy level of asset quality is imperative for survival of the bank. In India’s per the RBI's latest report released on June 17 the banking stability indicator (BSI) that indicates banks financial stability worsened between the quarter of September 2016 to March 2017 due to a deterioration in asset quality and profitability. The report clearly stated that the gross non-performing assets (GNPAs) of some scheduled commercial banks (SCBs) may rise from the existing 9.6 per cent in the month of March…show more content…
To add to the woos further poor valuations of the public sector bank stocks, are not helping matters either, and raising fresh equity has become difficult altogether. The public sector banks have been reluctant to tap the markets for increasing their capital levels. Hence the underperforming banks are now faced with the even a greater levels of challenge and are now constantly looking at newer ways of meeting their capital needs. Some of these poorly managed banks could any day slide below the minimum regulatory threshold of capital if they don't organize their finances together. A very recent example would be the united bank of India where the CAR dropped to a level of 9%. To avoid this situation the immediate need of the hour for all banks, and more specifically the public sector banks, is that capital must be conserved and utilized as efficiently as possible.  LIQUIDITY COVERAGE RATIO: The Liquidity Coverage Ratio (LCR) concept was launched on January 1, 2015 where a minimum liquidity requirement of 60% is to be gradually increased to 100% by January 1, 2019 in a phased manner. The LCR is defined as a ratio of High Quality Liquid Assets (HQLA) to the Total Net Cash Outflows & is prescribed to address the short-term liquidity risk of banks and the banks would be required to maintain a stock of these HQLAs in an ongoing basis equal to the Total Net Cash

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