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Business News/ Opinion / Quick Edit/  Breathe easy
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Breathe easy

We should stay calm and not draw false parallels with Western banks in trouble

 India also insists on capital buffers in line with Basel 3 normsPremium
India also insists on capital buffers in line with Basel 3 norms

Considering how fast a bank as big as Switzerland’s Credit Suisse cratered close on the heels of a handful of others in the US, anxiety over the safety of banks everywhere, including in India, is understandable. As regulators take a closer look at possible frailties, India is relatively better placed for more than one reason. First, our regulatory vigil is tighter than it was for mid-sized US banks, which were relieved of stress tests applicable to those deemed of systemic importance. In hindsight, that call proved costly, as the troubles faced by the likes of Silicon Valley Bank might have been detected in advance and their collapse possibly averted. And while stricken banks in the West faced crises of confidence and liquidity, forcing them to liquidate sound investments at losses to meet a panicky tide of withdrawals, the likelihood of Indian banks getting roiled this way is limited, given mark-to-market rules and a cap on what portion of assets can be marked as held-to-maturity instead. India also insists on capital buffers in line with Basel 3 norms. Moreover, a domestic pile-up of bad loans is largely in the past now. In all, we should stay calm and not draw false parallels with Western banks in trouble.

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Published: 22 Mar 2023, 02:44 AM IST
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