Banking system to remain resilient and stable, says Shaktikanta Das

“The way Indian banking system has evolved and way it is positioned now, it will remain resilient and stable,” Das said.

Reserve Bank of India (RBI) Governor Shaktikanta Das has affirmed that the Indian banking system will continue to remain resilient and stable.

Das' comments came against the backdrop of stress in the US baking system through the last one week.

He mentioned that the central bank has taken various steps to ensure proper functioning of banking system. “The way Indian banking system has evolved and way it is positioned now, it will remain resilient and stable,” Das said at the 17th KP Hormis Commemorative Lecture, organised by Federal Bank.

He also said that the developments in banking system in US drive home the importance of ensuring more prudent asset-liability management, robust risk management, and sustainable growth in liabilities and assets undertaking prudent stress tests and building up critical buffers for any unanticipated futures stress.

In the last one week, US banking system is under stress after the failure of Silicon Valley Bank (SVB). Soon after this, two more banks were also shut down.

US banking regulators on March 10 announced the closure of Silicon Valley Bank (SVB) and seized its assets to protect depositors’ money.

The stress for the bank increased after depositors started pulling out their money and to meet that demand, the bank had to sell its investment in bonds whose value had declined due to rising interest rates.

SVB Bank had last week sold its $21-billion bond portfolio consisting of US Treasuries and mortgage-backed securities at a loss of $1.8 billion.

Das said during the height of covid-19 pandemic, they kept on stressing to build up capital buffers because the depth of covid pandemic was unknown or not known.

"Bank have build up additional capital buffers. We insisted banks to built up this because the outlook is uncertain," he added.

Additionally, the central bank also taken certain regulatory steps to strengthen the banking system.

These steps include implementation of leverage ratio in June 2019, Large exposure framework in June 2019, guidelines on securitisation on standard assets in September 2021, guidelines on digital lending in September 2022, among others.