Stress Testing Methodologies

LIST OF BOXES

2.1 Algorithm trading/High Frequency Trading

3.1 Are We Witnessing a Credit Boom?

3.2 Provision for Pension and Gratuity Liabilities Arising Out of Wage Revision in Public Sector Banks and Old Private Sector Banks: Systemic Concerns

3.3 Systemic Risks Posed by the Insurance Sector

4.1 Capital Buffers Proposals Under Basel III

4.2 The Bank Subsidiary Model and the Financial Holding Company Model

4.3 Main Features of the Proposed Amendments to Banking Legislations

4.4 Network Analysis of the Indian Interbank Market – Analytics and Methodology

5.1 CIMDO-Approach

LIST OF CHARTS

1.1 Macroeconomic Risk Map

1.2 Deceleration of Growth in 2011

1.3 PMI in Europe and the U.S.

1.4 Unemployment Rate

1.5 Global Imbalances

1.6 Government Balance and Debt

1.7 Contribution to Growth – Supply Side

1.8 Industrial and Capital Goods Production

1.9 Contribution to Growth – Demand Side

1.10 Global Commodity Price Indices

1.11 Housing Prices and Housing Credit

1.12 Gold Prices Continue to Rise

1.13 Oil Trade and Price and CAD

1.14 Net FDI and Portfolio Flows

1.15 Deficit and Debt (Centre and States)

1.16 Corporate Sector Performance

1.17 Household Consumption and Borrowing

1.18 Impairment in Retail Assets

1.19 Impairment of Housing Assets

2.1 10-year Bond Yields (in per cent)

2.2 US dollar Against Advanced (DXY) and Emerging Asian Currencies (ADXY)

2.3 Federal Funds Implied Probability of Target Rate in Federal Open Markets Committee Meeting in December 2011 Based on Federal Funds Futures Contracts

2.4 Stock Indices (normalised, July 1, 2010 = 100)

2.5 US$/JPY Spot Rate and 1 Month Volatilities (in per cent)

2.6 European Sovereign CDS in 5-year Maturity (in basis points)

2.7 Near Month Energy Futures Prices (in US$)

2.8 OPEC Capacity Versus Actual Production and OPEC Quota (In 000s barrels per day)

2.9 Commodity Price Movements (normalised, 02 July 2010 = 100)

2.10 30 – Day Rolling Correlation of Reuters – Jeffries CRB Index with Various Assets

2.11 Factors Affecting Banking System’s Liquidity

2.12 Money Market Rates in India (in per cent)

2.13 Indian Sovereign Yield Curve Shapes

2.14 WPI Inflation Forecasts and Actuals, and RBI Repo Rate (in per cent)

2.15 Bond Market Yields in 10-year Maturity (in per cent)

2.16 FII Equity and Debt Daily Net Flows (US$ million) and Exchange Rate of Rupee

2.17 Trend in ECBs and FCCBs and Interest Rate Differentials in 10-years

2.18 India’s International Investment Position (in US$ billion)

2.19 25 Delta Risk Reversals in the 6 Month Maturity for US$/INR and US$/CNY (in per cent)

2.20 Redemption Profile of FCCBs (in US$ million)

2.21 FII Gross Monthly Purchases and Sales in Equity Markets (in ` crore)

2.22 FII Gross Monthly Purchases and Sales in Debt Markets (in ` crore)

2.23 Financial Stress Indicator (with Projections upto August 2011 in Green)

3.1 Sovereign Funding Requirements

3.2 Banking Funding Needs

3.3 Growth in Select Balance Sheet Components

3.4 Share of CDs and Borrowings in Liabilities

3.5 Level of Liquid Assets

3.6 Maturity Profile of the Deposits and Advances

3.7 Ratio of CDs and Borrowings and CASA Deposits to Total Deposits

3.8 Growth of Credit and NPAs during Phases of Upturn and Downturn

3.9 Growth in Credit, NPAs and Tier-I Capital Funds vis-a-vis their Growth Trend

3.10 Credit Growth vis-à-vis its Long Term Trend

3.11 Share of Loans to Commercial Real Estate, Retail and Infrastructure in Gross Credit

3.12 Growth of Combined Exposure (Retail, Commercial Real Estate and Infrastructure Loans)

3.13 Growth in Real Estate Loans

3.14 Share of Real Estate Loans in Gross Credit

3.15 Real Estate NPA Ratios

3.16 Share of Retail Loans and its NPAs in Gross Advances and Gross NPAs

3.17 Growth in Housing and Personal Loans

3.18 Growth in Retail Loan NPAs

3.19 Ratio of Retail Loan NPAs

3.20 Growth of Infrastructure Loans and its NPAs

3.21 Share of Important Infrastructure Segments in Total Infrastructure Credit

3.22 Growth in Infrastructure Segments

3.23 Ratio of NPAs in Banks’ Exposure to Infrastructure Sector

3.24 Risk Wise Distribution of Bank Credit to Industries

3.25 Bank Groups’ Exposure to High Risk Industries

3.26 Growth in the Outstanding Exposure and NPAs in Priority Sectors

3.27 Growth in OBS Exposures Among Bank Groups

3.28 Distribution of OBS Exposure

3.29 Composition of OBS’ Constituents

3.30 Capital Adequacy Ratios of the Banks’ Groups

3.31 Leverage Ratio of Bank Groups

3.32 Gross and Net NPA Ratios

3.33 Growth of Advances and NPAs

3.34 Slippage Ratio Over the Years

3.35 Category Wise NPAs

3.36 Provisioning Coverage Ratios (PCR) of Bank Groups

3.37 Income and Expense Components as Proportion of Total Income and Expense

3.38 Growth of Select Components of Income and Expense

3.39 Share of Profit from Trading in Investments and Staff Expenses in Other Income/Expenses

3.40 Profitability Ratios

3.41 Banking Stability Map

3.42 Banking Stability Indicator

3.43 Gross NPA Ratio of Co-operative Banking Sector

3.44 Select Financial Performance Indicators of Scheduled UCBs

3.45 Borrowings of NBFCs ND SIs

3.46 Financial Soundness Indicators of NBFCs ND SIs

3.47 Financial Soundness indicators of NBFC-Ds

4.1 CRAR Projections (2012)

4.2 CRAR Projections (2013)

4.3 Ratio of Credit to GDP

4.4 Ratio of Credit to GDP(Seasonally Adjusted)

4.5 Real GDP Growth

4.6 Interest Income to Total Assets

4.7 Profit Before Tax to Assets

4.8 Price to Earnings (PE) Ratio

4.9 Increase in Risk Weighted Assets Based on Transitional and Stressed Ratings

4.10 Bipartite Representation of Bank Lending in Four Banking Groups

4.11 Net Bilateral Exposures of All Banks

4.12 Net Bilateral Exposure of Top 20 Banks

4.13 Impact of Failure of One Trigger Bank

4.14 Impact of Failure of Two Trigger Banks

4.15 Impact of the Failure of Top 20 Banks (one at a time)

4.16 Impact of the Failure of Ten Pairs of Trigger Banks (one pair at a time)

4.17 Trends in Volume

4.18 Trends in Value

4.19 Cross-system Linkages in the Indian Scenario

4.20 Common Participants in Various Payments and Settlements Systems

5.1 JPOD and BSI

5.2 Individual PoDs and JPoDs : Percentage Changes

5.3 Toxicity Index: Bank-wise

5.4 Vulnerability Index : Bank-wise

5.5 Cascade Effects : Bank-wise

5.6 Simulation of Stress Conditions: Change in Density of Aggregate Risk Indicator - Return on Assets – March 2011

5.7 Duration of Equity - Trend (Commercial Banks)

5.8 Duration of Equity – Frequency Distribution
(Scenario I - Savings Deposits Withdrawal within 1 month)

5.9 Duration of Equity - Frequency Distribution
(Scenario II - Savings Deposits Withdrawal in 3 - 6 Months)

5.10 Liquidity Position of Banks : March 2010 Baseline and Stressed Scenario

5.11 Liquidity Position of Banks: March 2011 Baseline and Stressed Scenario

5.12 Liquidity Sustainability Ratio: March 2011

5.13 Non-Performing Advances under Stress Scenarios

5.14 Banks Capital Adequacy Ratios : Translated from NPAs Under Stress Scenarios

5.15 Movement of Accumulated Impulse Response

5.16 Stress Testing Scheduled UCBs: Impact of Shocks on Capital Position

LIST OF TABLES

2.1 ECBs Registered with the Reserve Bank (in US$ million)

2.2 VAR Granger Causality

2.3 Parameter Estimates

2.4 Lenders’ Profile of ECBs (in US$ million)

2.5 Autocorrelation coefficients at the First and Second Lag Level for Daily Net FII Flows in Equity and Debt into India

3.1 Distribution of SCBs’ CRAR and Core CRAR

3.2 Indicators Used for Construction of Banking Stability Map and Banking Stability Indicator

5.1 Stress Test on Projected Balance Sheet

5.2 Baseline Projections

5.3 Stress Scenarios

5.4 Non Performing Advances Ratio Under Stress Conditions