Home/ Markets / Stock Markets/  SVB fallout: Zerodha's Nithin Kamath on investing in govt bonds without taking risks

Billionaire startup founder Nithin Kamath on Monday said the Silicon Valley Bank (SVB) crisis has brought to the forefront in the US is around holding money in government bonds without taking risks.

“With the SVB crisis, there's a lot of talk in the US about the need for a bank that holds money in government bonds without taking risks," Kamath, who runs India's largest stock broking platform Zerodha, wrote on Twitter.

Explaining further, he said, “Just a simple wallet where people keep their cash, earn a reasonable interest, & make payments. What RBI intended with payments banks."

Kamath also highlighted why payment banks in India couldn't taste the kind of success that was expected. “Payments bank didn't pick up in India because users didn't want to pay monthly fees. Also, payments became highly competitive, with businesses undercutting each other. Also, those who took licenses saw payments bank mainly as a stepping stone to a full-fledged bank license," he said.

Banking woes

The US banking crisis remained at the centre stage keeping the participants on their toes. SVB's dramatic implosion this month was the largest banking failure since the 2008 financial crisis.

The failure of the California high-tech lender on March 10, and the collapse of New York's Signature Bank a few days later, sparked a rout in regional banking stocks and led many analysts to conclude that the Fed will abandon an anticipated increase in the pace of hikes.

Powell told senators earlier this month that it may be necessary to increase the benchmark lending rate to tame the "widespread" inflationary pressures keeping price rises elevated above the bank's long-run target of two percent.

Futures traders responded by pricing in a 50-basis-point rise, according to CME Group.

But the financial stress brought to light by SVB's failure caused a dramatic turnaround in expectations.

The strains in the financial sector will likely have weakened the Fed's resolve to move more aggressively on March 21 and 22, Bank of America US economist Michael Gapen said on Friday.

"We think recent events have changed the debate," he wrote in a note to clients. "We think the debate is now between a 25 (basis points) rate hike in March, or none at all."

With agency inputs

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Updated: 20 Mar 2023, 08:21 PM IST
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