Credit Suisse Crisis: After Silicon Valley Bank, many such questions have arisen that will the crisis of American banks affect India? Should India's financial and banking sector be worried? So didn't get the answer. The reasons are many. The laws and regulations made for the financial and banking sector of India are different from the rest of the world. If we look at this question by linking it with Credit Suisse Cris, then there are many other questions around it.
Credit Suisse holds 0.1 per cent stake in India banking system
Which can definitely increase India's concern a little, because Credit Suisse is the 12th largest foreign bank in India and its total asset value here is Rs 20,700 crore. Even if Credit Suisse fails like SVP, it will not have any director effect in India. Credit Suisse owns only 0.1 per cent of the assets in the Indian banking system, which is a very small amount. However, according to a Jefferies study, Credit Suisse has a presence in the derivatives market and accounts for 60 per cent of its assets in debt, of which 96 per cent have a tenure of up to two months.
RBI will keep an eye
Given the relevance of Credit Suisse to India's banking sector, analysts are looking for a soft adjustment in the assessment of counterparty risk, especially in the derivatives market. Jefferies analysts Prakhar Sharma and Vinayak Agarwal said, "We expect the RBI to closely monitor liquidity issues and counterparty risk and intervene as needed." Due to this, institutional deposits can also move towards large / quality banks.
Foreign banks remain active in the derivatives market
Foreign banks have a relatively small presence in India with a share of 6% in total assets, 4% in loans and 5% in deposit amounts. They are more active in the derivatives market (forex and interest rates) where they have a 50 per cent share. Credit Suisse has only one branch in India located in Mumbai. About 70 per cent of the assets are in G-Sec (short term) and zero are non-performing loans. Like other foreign banks, its off-balance sheet is 7 times of total assets. According to Jefferies, lending accounts for 73 per cent of total liabilities in India and 96% of borrowings have a tenure of up to 2 months. The deposit base is small at Rs 28 billion, which is 20 per cent of total liabilities and 70 per cent of the subsidiaries. While the share of short term liabilities is more which are in liquid G-Secs.
Things are getting worse for India
According to the data, HSBC is the largest foreign bank in India as it has assets of around Rs 2.47 lakh crore, followed by Standard Chartered, Deutsche Bank and JP Morgan. By the way, all the banks are connected with each other, so there is a possibility of impact in India as well. On the other hand, billionaire banker Uday Kotak today expressed confidence by saying that even though global turmoil in financial markets continues, macro factors are turning better for India. He tweeted that the current account deficit looks to be below 2.5 per cent in FY2023, and is seen going below 2 per cent in FY2024. The fall in the price of crude oil also helps. If we walk our talk and navigate well, India can stand out in this turmoil.
Decline in banking sector
Let us tell you that on Wednesday, the stock of Credit Suisse Bank had sunk by 31 percent on Wednesday. Because of which the trading of its shares had to be banned. Since the banking and financial sector has been seen in the US and European markets, the market cap of the European financial sector has decreased by more than $ 127 billion. On the other hand, Bank Nifty in India is trading with a decline of 0.50 per cent. By the way, since March 8, Bank Nifty is trading with a decline of about 5 percent.
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