, India
Photo from Credit Suisse website.

India’s banks can withstand fallout from US bank failures, Credit Suisse sale

The companies have manageable exposure to these banks.

Indian banks and finance companies are capable of enduring potential ill-effects from the banking problems in the US and Europe, according to S&P Global Ratings.

The ratings agency noted that Indian institutions have no meaningful direct exposure to US lenders Silicon Valley Bank (SVB) and Signature Bank– which abruptly collapsed between March 10 to 12– or Credit Suisse, which recently announced that it is being acquired by Swiss rival UBS.

“S&P Global Ratings expects the secondary impacts to be manageable, although the decision to write-off Credit Suisse's additional Tier 1 bonds may contribute to a higher cost of capital for banks. Only a significant escalation would lead us to change our view,” S&P wrote.

India's high domestic savings rate offers further support.

About 60% of the banking system is government-owned, further bolstering the perceived safety of bank deposits.

Notably, Indian banks generally hold high levels of government securities due to a steep statutory liquid ratio requirement: 20%-25% of assets for large government-owned banks and 17%-19% of assets of top private sector banks are parked in government securities. About 80% of these government securities are in held-to-maturity portfolios, S&P added.

ALSO READ: India’s card payments market to grow 23.6% to $361.6b in 2023: analyst

However, this exposes them to the risk of unrecognized losses if interest rates rise. 

Amongst entities, Bajaj Finance and Hero FinCorp both benefit from being part of a stronger group, and have better or preferential access to funds, S&P said.

Muthoot Finance and Manappuram Finance, on the other hand, face refinancing risk due to their dependence on short-term liabilities. 

“Mitigating factors include positive asset-liability management. This stems from the fact that a large portion of their assets are short-term gold loans, which are self-liquidating, and are a constant source of liquidity,” the rating agency said.

It added that Muthoot Finance and Manappuram Finance also have a high level of equity capital, at just over a quarter of their total liabilities. 

Shriram Finance, meanwhile, is strongly reliant on confidence-sensitive wholesale funding sources such as securitization, which could lead to higher volatility in funding costs. 

Follow the links for more news on

Join Asian Banking & Finance community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!


Hong Kong’s livi bank launches game-changing app for SMEs
Going fully digital on opening accounts and approving quick loans to SMEs raises ‘livi Business’ disbursements to over HK$70m (US$8.9m) as of end-April.
3 principles guide Bank Aladin Syariah in tapping Indonesia’s customer segments
Within a year, the digital sharia bank got past low penetration to record 1.7 million customers and now targets multiple times growth by end-2023.
Bankers face sluggish hiring market, layoffs in Hong Kong
Industry insiders reveal how investment banks prioritize cost efficiency and productivity over hiring new employees.