SVB: SVB’s lesson is on prudence, but Indian banks stable: RBI Governor Shaktikanta Das

MUMBAI: RBI governor Shaktikanta Das said the events surrounding Silicon Valley Bank (svb) the bankruptcy in the United States highlights the need for banks to be prudent in the management of assets and liabilities and to grow their deposits in a sustainable way. He also said the incident highlights the dangers cryptocurrencies pose to banks.
“Recent developments in the US banking system have brought to the fore the criticality of banking regulation and supervision. These are areas that have a significant impact on each country’s maintenance of financial stability,” Das said in a speech on Friday. Without naming SVB specifically, Das said developments in the US confirm the importance of ensuring prudent management of liabilities, sound risk management and sustainable growth of liabilities and assets, conducting periodic stress tests and building up capital buffers for any unforeseen future stress.

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Das was optimistic about the world economy. “The risk of a hard landing has dissipated around the world, even as the pace of disinflation remains less than desirable,” he said. He was giving the KP Hormis memorial lecture at the Federal Bank headquarters in Kochi.
Das said India’s financial system is stable as it is backed by a well regulated and supervised banking sector, along with a well regulated NBFC sector and other financial entities that are under the domination of the central bank.
“We are now taking a much deeper dive into banks’ business models, which may not be to the banks’ liking. They might think we’re interfering in business operations. We are not. We raise awareness of them that we have analyzed… we find that this problem is developing in your bank. Has this issue been considered by you? If not, let the bank’s board make a decision.
The RBI governor also said that although there was volatility in exchange rates, India’s external debt was within manageable limits.
Das said the group of the world’s 20 largest economies (G20) should strengthen its coordination to help those countries facing challenges related to high external debt due to the recent strengthening of the dollar. He also stressed the immediate need for the G20 to provide climate change finance to the countries most affected.


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