Shaktikanta Das said the SVB crisis shows the importance of strong regulations
Mumbai:
Reserve Bank of India Governor Shaktikanta Das has cautioned banks against any build-up of asset-liability mismatch, saying both are detrimental to financial stability and indicated that the ongoing crisis in the US banking system could lead to such Out of mismatch.
Delivering the annual KP Hormis (Founder of Federal Bank) Memorial Lecture in Kochi on Friday, the Governor was quick to acknowledge and assure that the domestic financial sector is stable and the worst of inflation is behind us.
Amid continued volatility in exchange rates, especially due to excessive appreciation of the US dollar, and its impact on nations’ ability to service external debt, Mr. Das said, “We have nothing to fear as our external debt is manageable and thus appreciated. The greenback is not a problem for us”.
The RBI governor focused much of the speech on India’s G20 chairmanship and in this context, he called for more coordinated efforts by the grouping of the world’s 20 largest economies to help countries that are facing high foreign exchange rates due to the rise in the US dollar. The loans were risky.
He said the group should provide climate change financing to the most affected countries on a war footing.
On the US baking crisis where balance sheets of two mid-sized banks (Silicon Valley Bank and First Republic Bank) were eroded by over $200 billion last week, he said the current crisis magnifies the importance of strong regulations that Let’s focus on sustainable development. And not excessive build-up on the asset side or the liability side.
Mr. Das, without naming the American bank, said that prima facie, one of them had deposits disproportionate to its assets and turnover.
Mr Das, who has been an open critic of private digital currencies, said the ongoing US banking crisis also clearly shows the risks private cryptocurrencies pose to the financial system.