The financial stability of 18 banks is at risk as their top three borrowers may default on loans, warns a central bank report. Such defaults could trigger a liquidity crisis, with these banks already struggling to maintain the minimum Capital to Risk (Weighted) Assets Ratio (CRAR). Currently, 11 out of 61 banks fall below the 10% CRAR benchmark, highlighting systemic fragility.
The report notes that even a 3% rise in non-performing loans could push five more banks below the required CRAR, compounding the sector’s vulnerability. Analysts link capital deficits to poor asset quality and financial weakness. Additionally, rising interest rates could worsen the crisis, undermining banks’ ability to manage capital requirements and increasing exposure to financial shocks.
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