RBI Governor Shaktikanta Das Addressing the annual KP Hormis (Federal Bank Founder) Memorial Lecture in Kochi today, cautioned banks against any creation of asset-liability mismatch, saying both are detrimental to financial stability. Furthermore, Das indicated that the ongoing crisis in the US banking system emanated from such mismatches. He asserted that the domestic financial sector is stable and the worst of inflation is behind us.
Amid continued volatility in exchange rates, especially due to excessive appreciation of the US dollar, and its impact on nations’ ability to service external debt, Das said, “We have nothing to fear as our external debt is manageable.” and thus appreciating greenback poses no problem for us”.
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Das on climate change financing
The Governor focused much of the speech on India’s G20 Presidency and in this context, he called for more coordinated efforts by the grouping of the world’s 20 largest economies to help countries with high external debt exposure due to the rise in the US dollar . He also said that the group should provide climate change financing to the most affected countries on a war footing.
On the US baking crisis where two medium-sized banks (Silicon Valley Bank and First Republic Bank) with balance sheets of over USD 200 billion went belly up last week, he said the ongoing crisis drives home the importance of strong regulations. Let’s focus. Sustained growth and excessive creation neither on the asset side nor on the liability side.
Risks of Private Cryptocurrencies
Das, without naming the US bank, said that prima facie one of them has deposits disproportionate to its assets and business which is difficult to handle. Das, who has been an outspoken critic of private digital currencies, said that the ongoing US banking crisis also clearly shows the risks of private cryptocurrencies to the financial system.
(With inputs from PTI)