New Delhi, March 18: Amid US banks’ crisis, Reserve Bank of India Governor Shaktikanta Das on Friday said Indian banking system remains stable, resilient. At the 17th K P Hormis Commemorative Lecture in Kochi, Das said US banks’ crisis shows “need for prudent asset liability management”.
Banks must do proper risk assessment before investing in bonds, said Das while referring to Silicon Valley Bank collapse.
India’s total external debt is within manageable levels, he said. RBI has been constantly engaging with banks and has nudged them to adopt robust risk management practices, conduct periodic stress tests and build sufficient capital buffers, Das said.
He also said the grouping must provide climate change financing to most affected countries on a war footing. On the US baking crisis where two mid-sized banks (Silicon Valley Bank and First Republic Bank) with over $200 billion in balance sheets each went belly up last week, he said the ongoing crisis drives home the importance of robust regulations that focus on sustainable growth and not excessive build-up either on the asset side or liability side. Das, without naming the US bank, said that on the face of it, one of them had unmanageable deposits in excess of their assets side business.
Bank stocks across the world have tumbled amid fears of a widespread banking crisis in United States and Europe. “Our financial sector is stable. worst of inflation behind us. Our external debt is manageable, so dollar rise does not pose any problem to us,” said Das. RBI Governor called for coordinated attempts by G20 countries to help countries with high external debt risks due to dollar rise.
“Ongoing US banking crisis drives home the importance of robust regulators, sustainable growth and clearly shows risks of private cryptocurrencies to the financial system,” he said.
Excessive deposit or credit growth is bad for the banking system, added Das, adding that risk of a hard landing for the world economy has dissipated.