India’s financial system insulated from developments in US, Switzerland: Das

India’s financial system remains “completely” insulated from the recent developments in the US and Switzerland, said RBI Governor Shaktikanta Das.

The recent developments in the US include the failure of Silicon Valley Bank and Signature Bank due to asset-liability mismatches and their closure. Financial stress at Switzerland’s second largest bank, Credit Suisse, led Swiss authorities to merge it with larger rival UBS.

At a press conference in Washington on Thursday, Das said at the global level, the recent developments in the banking system in the US and in Switzerland, have once again brought into focus the importance of financial stability and banking sector stability, said a PTI report.

The Governor was in Washington for the annual spring meeting of the International Monetary Fund and the World Bank along with Finance Minister Nirmala Sitharaman.

‘Very healthy’

“So far as India is concerned, the Indian banking system remains completely insulated from the developments that have taken place in the US or in Switzerland. Our banking system is resilient, stable and healthy,” Das said.

“The parameters related to banking, whether it is capital adequacy, or it is the percentage of stressed assets or it is the liquidity coverage ratio of individual banks both at individual level as well as at the systemic level or issues like provision coverage ratio, aspects like net interest margin of banks, profitability of banks, whichever parameter you take into consideration, the Indian banking system continues to be very healthy,” he said.

Das said as far as the Reserve Bank of India (RBI) is concerned, over the last few years, “We have significantly improved and tightened our regulation and supervision of the entire banking system, including the non-banking financial companies”. The focus of supervision is on early identification of any buildup of vulnerabilities and not waiting for the crisis to build up, he said.

In his monetary policy statement last week, Das observed that with the fight against inflation far from over, the global economy is now confronted with serious financial stability challenges from the recent banking sector developments in some advanced economies.

“This calls for a reappraisal of the responsibilities of the regulators and the regulated entities world over and their collective role in safeguarding the stability of the financial system. While regulators need to identify potential vulnerabilities and take proactive regulatory and supervisory measures, it is incumbent upon the regulated institutions to exercise due diligence in their risk management and corporate governance practices,” he had said.

They need to pay close attention to asset-liability mismatches and profile of their deposit base, while building up adequate capital buffers and conducting periodic stress tests, he added.