Foreword

List of Select Abbreviations

Chapter I : Assessment and Outlook

Chapter II : Macroeconomic Environment

Chapter III : Financial Markets

Chapter IV : Financial Institutions

Chapter V : Financial Sector Policies and Infrastructure

Chapter VI : Resilience of Indian Banking Sector

ANNEX 1

Stress Testing Methodologies

LIST OF BOXES

2.1 Sovereign Debt Crisis

3.1 Proposed Safeguards in Credit Default Swaps (CDS)

4.1 Indian Banks’ Exposure to Highly Leveraged Companies

4.2 Reviving Securitisation Markets

5.1 Restructuring the Liability Structure of a Bank’s Balance Sheet: Contingent Capital and Bail-ins - Perspective and Issues

5.2 Measuring Systemic Risk - Issues and Options

5.3 Financial Networks and Systemic Risk Management

6.1 Macro- Stress Testing

LIST OF CHARTS

2.1 Overall Macroeconomic Risks

2.2 Global Growth and Inflation

2.3 PMI in the U.S. and Eurozone

2.4 Unemployment

2.5 General Government Gross Debt

2.6 Major Twin Deficit Economies

2.7 Baltic Dry Index

2.8 Contribution of Growth

2.9 Rise in Purchasing Managers Index (PMI)

2.10 Business Expectations Surveys

2.11 Structural Transformation of GDP

2.12 Change in Index of Industrial Production

2.13 Elevated Global Food Prices

2.14 Elevated Domestic Food Prices

2.15 Savings and Investment

2.16 Combined Debt of Centre and States and Primary Balance

2.17 Average Maturity of Sovereign Debt in Some Select Countries

2.18 Sovereign Debt Maturing in Next Three Years

2.19 Maturity Profile of Central Government Dated Securities

2.20 Components of Capital Flows

2.21 International Investment Position

2.22 External Liabilities on the Rise

2.23 Housing Prices and Credit

2.24 Quality of Banks Assets in Real Estate Sector

2.25 Interest Payments, Profits and Tax

2.26 Industrial Outlook Survey

2.27 Household Consumption and Borrowing

2.28 Quality of Credit to the Housing Sector

2.29 Improvement in Quality of Retail Assets

3.1 Sovereign CDS Prices

3.2 Prices (US$) of ETFs in Various Assets Listed in US

3.3 Prices (US$) of ETFs in Various Assets Listed in US

3.4 US dollar Money Market Rates (3 month and overnight)

3.5 Euro Money Market Rates (3 month and overnight)

3.6 Value of the US dollar vis-à-vis Developed (DXY) and Asian Currencies(ADXY)

3.7 Annualised Yields on 3-month Deposit Rates in Various Currencies

3.8 Monthly Net FII Debt Flows Versus 10-year Yield Differential between US and Indian Sovereign Bonds over the Last 4 Years

3.9 Emerging Market Dedicated Regional Equity Fund Flows in 2010

3.10 Cumulative EM Fixed Income Capital Flows

3.11 Monthly Net FII Flows Versus VIX Index over the last 4 years

3.12 Quarterly FII Flows and Sensex

3.13 3 Month Implied Vols in US$/INR and EUR/US$

3.14 Trend in Volumes and Open Interest on All Three Exchanges for USD-INR Futures in 2010

3.15 Difference between Offshore and Onshore OIS Rates in 1-year and 5-year Maturity

3.16 3-Month and Overnight Rates

3.17 Call Rates, LAF Corridor and its Usage

3.18 Share of Collateralised Lending

3.19 Composition of Indian Money Market

3.20 Shifting Maturity Pattern of CPs in 2010

3.21 10-year Bond Market Rates

3.22 Holding Pattern of Government Bonds in March 2007 (Inner) and September 2010 (Outer)

3.23 Monthly Corporate Bond Trading Turnover and Private Issuances in 2010

3.24 Market Share (by Notional Amount) in IRS (MIBOR) for October 2010

3.25 Market Share of Participants in Government Securities Trading

3.26 Financial Stress Indicator – India

4.1 Banks’ Private Credit Growth in Advanced Economies

4.2 Banking Sector CDS Spreads

4.3 Global Banking Indices

4.4 CDS Spread of Select Indian Scheduled Commercial Banks

4.5 Performance of Indian Scheduled Commercial Banks’ Equities

4.6 Growth of Deposits, Advances and Investments of the SCBs

4.7 Trend of Growth in the Important Balance Sheet Items of Bank Groups

4.8 Growth of Assets to GDP Ratio of SCBs

4.9 Share of Major Constituents in the Balance Sheet of SCBs

4.10 Growth in Advances of Bank Groups

4.11 Credit to GDP Ratio of Select Economies during 2004-09

4.12 Deposits and Portion of CASA of the SCBs

4.13 Reliance on Big Ticket Deposits

4.14 Balance Sheet Leverage Multiples of Select US Banks

4.15 Balance Sheet Leverage Multiples of Select Banks of Europe and Japan

4.16 Leverage Multiples of SCBs

4.17 Growth of Sectoral Credit of SCBs

4.18 Housing and Personal Loans and Level of Unsecured Credit

4.19 Growth of Retail and Housing Credit of SCBs

4.20 Share of Retail and Housing Credit of SCBs in their Total Advances

4.21 NPAs Growth of SCBs in Retail Sector

4.22 Growth of Infrastructure Advances by SCBs

4.23 Growth in Components of Real Estate Loans by SCBs

4.24 Share of NPAs in Real Estate Loans by SCBs

4.25 Exposure to NBFCs

4.26 Off Balance Sheet Exposure as Percentage of the On-balance Sheet Assets

4.27 Composition of OBS Exposures

4.28 Concentration OBS Exposure among the Bank Groups

4.29 Off Balance Sheet Exposure-Notional and Credit Equivalents

4.30 Capital Adequacy under New Capital Adequacy Framework

4.31 Capital Adequacy under Basel-I and Basel-II Frameworks

4.32 Growth Rates of Gross NPAs of SCBs

4.33 NPA Ratios and Fresh Slippage Ratios of SCBs

4.34 Growth in the Gross NPAs of Bank Groups

4.35 Category-wise Break-up of Gross NPAs of SCBs

4.36 Provision Coverage Ratio of Bank Groups

4.37 Growth of Select Components of Income and Expense of SCBs

4.38 Share of Important Components of Income and Expense of SCBs

4.39 Important Profitability Ratios of SCBs

4.40 Liquidity Assessment (stock approach)

4.41 Asset Liability Mismatches of SCBs

4.42 Banking Stability Map

4.43 Banking Stability Index

4.44 NPA Ratios of RRBs

4.45 Important Balance Sheet Items of Rural Cooperative Credit Institutions

4.46 Financial Soundness Indicators of Rural Cooperative Credit Institutions

4.47 NPA Ratios of UCBs

4.48 Deposit Taking NBFCs and Quantum of their Deposits

4.49 Financial Performance of Deposit Taking NBFCs

5.1 Share of Top 10 Payment & Settlement System Participants in Aggregate Balance Sheet, OBS Exposures and Interbank Exposures of Scheduled Commercial Banks

5.2 Trends in Value

5.3 Trends in Volume

5.4 Share of Electronic and Paper based Systems: Value

5.5 Share of Electronic and Paper based Systems: Volume

5.6 Concentration in Payment Systems (%)

5.7 Share in Outright G-Sec Trades

5.8 Share in Outright Forex Trades

5.9 Share in Outright MIFOR Swaps

5.10 Share in Outright MIBOR Swaps

6.1 Commercial Banks Falling Below 9% CRAR on Increase in Non Performing Advances

6.2 Duration of Equity - Frequency on Time Buckets
(Scenario I - Savings Deposits withdrawal within 1 month)

6.3 Duration of Equity - Frequency on Time Buckets
(Scenario II - Savings Deposits withdrawal in 3 - 6 months)

6.4 Liquidity Position of Banks’ Stressed Scenario

6.5 UCBs - Bank-group-wise Manageable Proportion of Deposit in Various Scenarios - September 2010

6.6 UCBs - Distribution According to Manageable Proportion of Deposits – September 2010

6.7 Non-Performing Advances under Stress Scenarios

6.8 Capital Adequacy Ratios :Translated from NPAs under Stress Scenarios

LIST OF TABLES

2.1 Services Sector Indicators

3.1 Share of Banks in Aggregate Size/Turnover of All SCBs in September 2010

4.1 CD and ID Ratios of SCBs

4.2 Short Term Liquidity Assessment of the SCBs

4.3 Liquidity Ratios - Dependence on Short Term Funds for Long Term Financing

4.4 Maturity Profile of Deposits and Advances

4.5 Grade wise Presence of Urban Cooperative Banks

4.6 Capital Adequacy Ratios of Urban Cooperative Banks

4.7 Profitability Ratios of Urban Cooperative Banks

4.8 NPA Ratios of Deposit Taking NBFCs

5.1 Ranks of Top 10 Payment & Settlement System Participants in Aggregate Balance Sheet, OBS Exposures and Interbank Exposures of Scheduled Commercial Banks

5.2 Netting Efficiency

5.3 Usage of Intra-day Liquidity

6.1 Duration of Equity (Commercial Banks)

6.2 Variables for Bivariate Regression

6.3 Multivariate Regression Model: Estimated Coefficients of Variables

6.4 Baseline Projections

6.5 Stress Scenarios