26-04-2023
WATSUPPTODAY DESK

In its monthly review report, the Ministry of Finance noted that recent bank failures in the US and Europe, which were brought on by the cycle of tightening monetary policy and interest rate hikes, raised concerns among policymakers about the vulnerability of financial systems, particularly in emerging market economies (EMEs). According to the Finance Ministry, the takeover of the crisis-hit Credit Suisse Bank by the Union Bank of Switzerland (UBS) and the failure of a few regional US banks, beginning with Silicon Valley Bank (SVB), have sent shockwaves through the global banking sector and raised concerns about an economic contagion. The review report put on Tuesday categorically stated that India’s banking system is considerably less prone to such incidents. “A discussion of what caused the collapses overseas is beyond our remit but we will confine to restating the factors that make the Indian banking system considerably less prone to such developments in the near-to-medium term future,” the report said. One of the most prominent lenders in the world of technology startups, Silicon Valley Bank, which was struggling, collapsed on March 10, after a run on the bank by the depositors. Its closure led to a contagion effect and subsequent shutting down of other banks. Banking supervision in India is robust with the RBI’s coverage of institutions, regardless of asset size and macro stress tests are also performed from time to time on individual banks, the finance ministry said. Also, the finance ministry said the rapid withdrawal of deposits is unlikely as 63% of the deposits the households contributed are considered “sticky. What the report says…
Banking supervision in India is robust with the RBI’s coverage of institutions, regardless of asset size and macro stress tests are also performed from time to time on individual banks Also, According to the finance ministry, it is doubtful that savings would be withdrawn quickly because 63% of the deposits made by householders are regarded as "sticky." Additionally, because public sector banks hold more than 60% of deposits, Indian depositors feel convinced that their money is safe, according to the survey.