Credit Suisse crisis to have limited effect on India
1 min read 20 Mar 2023, 01:56 PM ISTCredit Suisse, the second-largest bank in Switzerland, is the first major global bank to receive an emergency lifeline since the 2008 financial crisis.
PremiumIndia's banking sector is unlikely to be significantly affected by the recent issues faced by Credit Suisse, as the Swiss bank has a relatively small presence in the country.
As per media reports, according to equity analysts at Jefferies, Credit Suisse accounts for only 1.5% of foreign banks' assets in India and has a "small" 0.1% share of the overall banking assets in the country.
Jefferies estimates that Credit Suisse has just one branch in India and total assets of over 200 billion rupees ($2.42 billion). This indicates that the bank's operations in India are relatively small compared to other financial institutions in the country.
"Borrowings in India form 73% of total liabilities and 96% of borrowings have tenure of up to 2 months. The deposit base is smaller at ₹28 billion, forming 20% of total liabilities and 70% are from subsidiaries. While the share of shorter-term liabilities is high, assets are mostly in liquid G-Secs," Jefferies said.
Therefore, any negative impact on the bank's business is expected to have a limited impact on the Indian banking sector as a whole.
With assets worth over ₹2.47 lakh crore, according to data, HSBC is the biggest foreign bank in India. It is followed in size by Standard Chartered, Deutsche Bank, and JP Morgan.
Credit Suisse, the second-largest bank in Switzerland, is the first major global bank to receive an emergency lifeline since the 2008 financial crisis.
This has raised concerns about the ability of central banks to sustain their efforts to combat inflation through aggressive interest rate hikes. These concerns have led to market volatility not only globally but also in India.
Jefferies expects the Reserve Bank of India to closely monitor liquidity issues and counter-party exposures in Indian banks and intervene if necessary to mitigate any potential risks.
In India, Credit Suisse just has one location (in Mumbai). G-Secs (short-term) account for about 70% of assets, and there are no non-performing loans. Its off-balance sheet is seven times the total assets, similar to other foreign banks.
