A resilient bank needs to be financially, operationally and organisationally resilient and should have adequate capital buffers to be able to generate earnings even in times of severe macroeconomic shocks, said Reserve Bank of India governor Shaktikanta Das, adding that it has started looking at the business models of banks more closely.
“It (a resilient bank) should also have adequate liquidity to meet its obligations in various situations. Therefore, financial resilience is closely linked to a bank’s business model and strategy. The Reserve Bank has, therefore, started looking at the business models of banks more closely,” Das said. Governor Das was addressing a conference on ‘Financial Resilience’ organised by the College of Supervisors in Mumbai.
In the context of the recent banking sector instability in the US and Europe, Das said there is now a renewed focus on issues of financial resilience and stability.
Das added Indian banking system has remained resilient and has not been affected adversely by the recent crisis seen in the advanced economies.
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.
