raising capital will be crucial not only to ensure credit flow but also to build resilience in the financial system. we have recently ( 19th june and 1st july, 2020 ) advised all banks, non - deposit taking nbfcs ( with an asset size of ₹5, 000 crore ) and all deposit - taking nbfcs to assess the impact of covid - 19 on their balance sheet, asset quality, liquidity, profitability and capital adequacy for the financial year 2020 – 21. based on the outcome of such stress testing, banks and non - banking financial companies have been advised to work out possible mitigating measures including capital planning, capital raising, and contingency liquidity planning, among others. the idea is to ensure continued credit supply to different sectors of the economy and maintain financial stability. iii. major challenges 15. going forward, there are certain stress points in the financial system, which would require constant regulatory and policy attention to mitigate the risks. the economic impact of the pandemic – due to lock - down and anticipated post lock - down compression in economic growth – may result in higher non - performing assets and capital erosion of banks. a recapitalisation plan for psbs and private banks ( pvbs ) has, therefore, become necessary. while the nbfc sector as a whole may still look resilient, the redemption pressure on nbfcs and mutual funds need close monitoring. mutual funds have emerged as major investors in market instruments issued by nbfcs, which is why the development of an adverse feedback loop and the associated systemic risk warrants timely and targeted policy interventions. increasing share of bank lending to nbfcs and the continuing crunch in market - based financing faced by the nbfcs and housing finance companies ( hfcs ) also need to be watched carefully. 16. the global financial crisis of 2008 – 09 and the covid - 19 pandemic have dispelled the notion that tail risks to the financial system will materialise only rarely. the probability distribution of risk events has much fatter tails than we think. shocks to the financial system dubbed as ‘ once in a lifetime events ’ seem to be more frequent than even ‘ once in a decade ’. accordingly, the minimum capital requirements of banks, which are calibrated based on historical loss events, may no longer be considered sufficient enough to absorb the losses. meeting the minimum capital requirement is necessary, but not a sufficient condition for financial stability.

and cheap settlement solutions for europe. let me close my remarks by telling you a little story from china that might be good to keep in mind for future phases of the t2s project : once upon a time there was a host who offered his guests a pot of wine. as there didn ’ t seem to be enough for everyone, one guest suggested that each of them should draw a snake on the ground and the first guest to finish the snake should drink the pot. one guest finished his snake and was about to start drinking, when he said : “ i can add some feet to it. ” while he was still drawing, another guest finished his snake, grabbed the pot and drank the wine, whereas the guest who had added feet to the snake didn ’ t get any wine at all. to come back to t2s, i believe that a big challenge in the next phase will be to resist the temptation to “ add feet ” to t2s in the sense of too much specific features and thereby spoil it all. let us take the chinese story as a warning and let us continue to keep t2s lean, even if this implies compromises and sacrifices! this is the only piece of advice i want to give to “ my advisors ”, with whom i am very, very satisfied. i hope that all the pieces of the puzzle of opinions, letters of intents and decisions will be put together in the next few weeks so that we get the “ green light ” for our future cooperation with you.