Rbi: Impact of European banking crisis on US, India limited, ‘our financial system is safe’: Ex-RBI governor Subbarao

HYDERABAD: The impact of the ongoing banking crisis in the US and Europe on India is very limited as our banks and financial system are safe, the erstwhile Reserve Bank of India (RBI) Governor Duvvuri Subbarao said here on Saturday.
“The personal deposit base of our banks is significantly diversified. Good credit quality. Liquidity is sufficient. Our banks, in particular, have an SLR (legal liquidity ratio) requirement, which is a safety buffer. We have to be careful and vigilant, but the likelihood of a shock like (what) happened during the 2008-09 global financial crisis is very limited,” he said.
He also said he did not see a repeat of the waning frenzy of 2013, when foreign institutional investors pulled money out of stocks and bonds that caused the rupee to depreciate 15% between May 22 and August 30, 2013, and forced the RBI to raise interest rates. 1% during his leadership. The result was the reaction of Indian investors to the Fed’s announcement in May 2013 that it would reduce its bond purchases in the near future.
“The situation today is significantly different from the situation in 2013. Then there was a lot of pressure on the rupee. Our foreign exchange reserves were very limited. The fiscal deficit was high, but today the situation is different,” he said on the sidelines of the launch of the former IAS officer. G Kumaraswamy ReddyBiography “Life in the civil service”.
He added that the rupee is tracking more or less fundamentals. “The budget deficit is under control. The current account deficit, we were worried that it would cross the safety margin, but now we believe it will be within safe limits this year itself. A bit higher than in the past few years, but certainly. We have huge foreign reserves, so there is no repeat of the 2013 stagnation pressure. I think it is unlikely today,” he said.

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