Reserve Bank of India Governor Shaktikanta Das has warned banks against building asset-liability mismatches, saying both are detrimental to financial stability and implying that the ongoing crisis in the US banking system is beset by such mismatches seems to have gone out.
At the annual commemorative lecture of KP Hormis (founder of the Federal Bank) in Kochi on Friday, the governor was quick to acknowledge and reassure that the domestic financial sector is stable and the worst of inflation is behind us.
Given the continued volatility in exchange rates, particularly due to the excessive appreciation of the US dollar, and its impact on nations’ ability to service foreign debt, Mr. Das said, “We have nothing to worry about as our external debt is manageable and hence an appreciation in value of the greenback is not a problem for us”.
Mostly focused on India’s G20 presidency, the RBI governor called for more coordinated efforts from the group of the world’s 20 largest economies to help countries at high external debt risks due to US dollar appreciation.
He said the group must provide climate change funding to most affected countries on a war basis.
Referring to the US baking crisis, which saw two mid-tier banks (Silicon Valley Bank and First Republic Bank) each with over $200 billion in balance sheets fail last week, he said the ongoing crisis underscored the importance of robust regulation , which focus on sustainable growth and neither on the assets nor on the liabilities side are excessive build-ups.
Mr. Das, without naming the US bank, said one of them had seemingly unmanageable deposits in excess of its lending business.
Mr Das, who has been an outspoken critic of private digital currencies, said the ongoing US banking crisis also clearly shows the risks private cryptocurrencies pose to the financial system.