The Reserve Bank of India Governor Shaktikanta Das on Thursday said the Indian banking system has remained resilient and has not been affected adversely by the recent crisis seen in the banking system in some advanced economies.
Governor Das was addressing a conference on ‘Financial Resilience’ organised by the College of Supervisors in Mumbai. Das said in the context of the overall impact of the Covid-19 pandemic, the war in Ukraine and the recent banking sector events in the US and Europe on the financial sector, there is now a renewed focus on issues of financial resilience and stability.
One of the most prominent lenders in the world of technology startups, Silicon Valley Bank, which was struggling, collapsed on March 10, after a run on the bank by the depositors. Its closure led to a contagion effect and the subsequent shutting down of other banks.
Regulators and governments across the world are now looking at these aspects with greater intensity, Das said.
“The financial sector in a country and the individual entities therein like banks, non-banking financial companies (NBFCs) and other entities have to be resilient at all times. They should have the inner strength to withstand even the most stressful times.”
In India, he said RBI significantly strengthened its regulations and supervision of banks and other regulated entities in recent years.
“This historical function of providing emergency liquidity assistance to banks and other financial market institutions necessitates that central banks keep a close watch on banks and financial markets for signs of instability, if any,” Das said.
According to Das, a bank should have adequate capital buffers and be able to generate earnings even in times of severe macroeconomic shocks, besides having adequate liquidity to meet its obligations
RBI on its part has started looking at the business models of banks more closely, Das said.
