RBI Governor Shaktikanta Das warns banks against asset-liability mismatch amid SVB crisis

According to Shaktikanta Das, the SVB crisis reinforces the importance of strong regulations


Reserve Bank of India Governor Shaktikanta Das has warned banks against asset-liability mismatches, saying both undermine financial stability and that the ongoing crisis in the US banking system appears to have stemmed from such mismatches.

Delivering the annual KP Hormis (Federal Bank Founder) Memorial Lecture in Kochi this evening, the Governor was quick to acknowledge and assure that the domestic financial sector is stable and the worst of inflation is behind us.

Amid persistent exchange rate volatility, particularly due to the overvaluation of the US dollar and its impact on countries’ ability to service external debt, Mr. Das said, “There is nothing to fear as our external debt can be managed, so the rate will rise. green currency will not cause us any problems.”

The RBI governor focused much of his speech on India’s G20 chairmanship and in this context he called for coordinated action by the world’s 20 largest economies to help countries facing high external debt risks due to the rising US dollar.

He said the group should provide climate change funding to most war-torn countries.

Commenting on the US breadcrumb crisis, which last week saw the collapse of two mid-sized banks (Silicon Valley Bank and First Republic Bank), each with more than $200 billion in balance sheets, he said the ongoing crisis heightens the importance of strong regulations aimed at sustainable growth. and excessive savings on both the asset and liability sides.

Without naming the American bank, Mr. Das said one of them had non-performing deposits that exceeded their asset-side business.

An outspoken critic of private digital currencies, Mr. Das said the ongoing US banking crisis also highlights the risks private cryptocurrencies pose to the financial system.

Leave a Reply

Your email address will not be published. Required fields are marked *