BANK BUFFER

As many as five banks’ capital adequacy could slip below the minimum 9 per cent level mandated by the Reserve Bank of India. Similarly, three banks’ asset quality could get severely impacted if their top three large borrowers fail. That was the scenario painted by the RBI’s extreme stress test in Indian banks in its financial stability report released three months ago.

Covid-19 has suddenly put the ₹166 lakh crore industry in one such extreme stress test scenario. And the industry is not in the best of health. Two-thirds of the banks are in the midst of consolidation. Private sector banking, which has one-third market share in deposits and advances, is recovering from the failure