Silicon Valley Bank: The failure of Silicon Valley Bank (SVB) has shocked the global financial and technological communities. Other lenders, such as Signature Bank and First Republic Bank, have experienced the violent jolts as well. Aftershocks from Tuesday’s almost 7% decline in Japan’s Topix Bank index were felt as far away as Asia. Because US president Joseph Biden recently “promised” to preserve taxpayer money, the widespread liquidations and withdrawals of funds from banks have prompted the White House to step in and help.
White House intervenes to help after widespread liquidations
The alarm has now moved to Indian investors as well, who worry that the SVB collapse could get worse in the coming days, having a cascading effect on Indian lenders as well. Market watchers who follow the domestic banking industry, however, absolutely rule out the prospect of such an occurrence occurring in India. Soothing the anxieties of Indian investors regarding domestic banks, G Chokkalingam, Managing Director – Research at Equinomics Research and Consultancy has explicitly refuted that Indian investors have anything to worry about, while drawing comparison with the financial crisis of 2008-09.
Indian investors worry about potential cascading effect on Indian lenders
BSE Bankex increased four times in 18 months, from a low of 3,599 in 2009 to 15,108 in 2010, after dropping 72% during the 2008–2009 financial crisis. Yet, over the past two days, the BSE banking index has decreased by nearly 5%. According to Chokkalingam, during the financial crisis of 2008–2009, western investors panicked here in India as well and sold off all of their stocks, particularly banking stocks, before fleeing to the west with their money, only to miss a huge opportunity the following year in India.
Chokkalingam assures Indian investors of stability in the domestic banking industry
They ran from stronger, more stable structures to the unsteady buildings to seek safety, he continued. “Investors in Indian banking stocks shouldn’t be concerned in the slightest about SVB’s demise. Back then, banks survived the crises of much larger banks “said he. Lehman Brothers’ bankruptcy, which at the time was the largest in the US, had assets worth $680 billion; by contrast, SVB’s assets, which are expected to be valued $212 billion in 2022, are significantly less.
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Capitalmind founder and CEO echoes sentiment that Indian banks are in safe hands
Even the Reserve Bank of India (RBI) financial stability assessment rules out the probability of an Indian banking sector catastrophe on the scale of Silicon Valley Bank. The study was however published three months ago. It implied that India’s banking system is still stable. Deepak Shenoy, founder and CEO of Capitalmind, echoed a similar sentiment when he told Business Today that nothing will happen to the Indian banks. The domestic banking industry is in safe hands, and the RBI has done a great job, he said, making it unlikely that a crisis like this will occur in India.
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