ASSESS FORTE OF PUBLIC SECTOR BANKS IN INDIA

The Economic turmoil, increasing exposure of markets to specific industries, their interdependence have increased the vulnerability of credit lending institutions towards difficult to predictable phenomena. These in the short run and long run do create financial disasters both in domestic and global financial markets creating financial uncertainty. Stress testing of Banks is one of the effective and prevalent ways to proactively alert bank management with regard to adverse unforeseen outcomes related to variety of risks and provides an indication to how much capital might be needed to absorb losses should the large shocks occur. In this research paper we plan to undertake stress testing of public sector undertaking banks with sensitivity analysis. Internationally, stress testing has become an integral part of banks' risk management systems. RBI has recommended guidelines for Stress testing in tune with Basel Committee on Banking Supervision's (BCBS) Principles for Sound Stress Testing Practices and Supervision. All Scheduled Commercial Banks (SCBs) have to adhere to the guidelines at a minimum. We plan to use this technique to assess banks' financial strength as per RBI Guidelines