Reserve Bank of India Governor Shaktikanta Das has warned banks against any build-up of asset-liability mismatches, saying both are harmful to financial stability and suggested that the ongoing crisis in the US banking system appears to have stemmed from such mismatches.
Delivering the annual KP Hormi (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 continued volatility in exchange rates, particularly due to the excessive appreciation of the US dollar, and its impact on the nation’s external debt servicing capacity, Mr Das said: “We have nothing to fear as our external debt is manageable and thus appreciation of the greenback. is not a problem for us”.
The RBI governor focused most of the speech on India’s G20 presidency, and in this context he called for more coordinated efforts by the group of the world’s 20 largest economies to help those countries with high risks of external debt due to the rise of the US dollar.
He said the grouping must provide climate change financing to most affected countries on a war footing.
Regarding the U.S. banking crisis, in which two mid-sized banks (Silicon Valley Bank and First Republic Bank) with over $200 billion in balance sheets each went bankrupt last week, he said the ongoing crisis underscores the importance of robust regulations that focuses on sustainable growth and not excessive build-up either on the asset side or the liability side.
Das said, without naming the US bank, that one of them had unaccounted deposits in addition to their asset side business.
Das, who has been an outspoken critic of private digital currencies, said the ongoing US banking crisis also clearly shows the risks of private cryptocurrencies to the financial system.