'Trouble in Credit Suisse unlikely to impact India's banking system'

NEW DELHI: India's banking system is expected to remain unscathed from the troubles in Credit Suisse as it has a very small presence in the country, experts said.

Although Credit Suisse is more relevant to India's financial system than Silicon Valley Bank (SVB), it has very limited operations, according to a report by Jefferies India.

The Switzerland-based bank, the report said, ''has less than Rs 20,000 crore in assets (12th among foreign banks), presence in the derivatives market and funded 60 per cent of assets from borrowings, of which 96 per cent are up to two months. Still, it's small for the banking sector with 0.1 per cent share of assets.'' Zurich-headquartered Credit Suisse operates in India with just 1 branch.

''Given the relevance of Credit Suisse to India's banking sector, we see softer adjustments in assessment of counter-party risks, especially in the derivative market,'' it said.

Meanwhile, the RBI is keeping a close tab on the evolving situation caused due to shuttering of a few banks and stress in other global lenders, sources said.

''We expect RBI to keep a close watch on liquidity issues, and counter-party exposures and intervene as necessary. This may also lead to institutional deposits moving more towards larger/ quality banks,'' the report said.

According to veteran banker Uday Kotak, who also is the managing director of Kotak Mahindra Bank, India's macroeconomic factors are turning better and it can stand out in this global financial turmoil.

''Even as the global turmoil continues in financial markets, the macro factors are turning better for India. The current account deficit looks below 2.5 per cent in FY 23 and going below 2 per cent in FY 24. Lower oil helps. If we walk our talk and navigate well, India can stand out in this turbulence,'' Kotak said in a tweet.

Foreign banks have a relatively smaller presence in India with a 6 per cent share in total assets, 4 per cent in loans and 5 per cent in deposits. They are more active in the derivative markets (forex and interest rates) where they have a 50 per cent share.

Most of them are present as branches of the parent bank with only a few present as wholly-owned subsidiaries.

However, Swiss National Bank (SNB) came to the rescue of Credit Suisse with a USD 54-billion lifeline to shore up its liquidity.

In its statement on Thursday, Credit Suisse said it would exercise an option to borrow from the central bank up to 50 billion Swiss francs (USD 54 billion).

Credit Suisse is the first major global bank to be given an emergency lifeline since the 2008 global meltdown and its problems have raised doubts over whether central banks will be able to sustain their fight against inflation with aggressive interest rate hikes. While Credit Suisse may repeat the liquidity crisis of Silicon Valley Bank, its impact, however, may be muted in India as domestic financial institutions are not as interconnected with the international financial system as those of other nations, Neeraj Tyagi, co-founder and CEO We Founder Circle said. Even if the bank fails, the implications on the Indian economy will be limited, Tyagi said, adding, the Indian ecosystem now has its own depth with the influx of large angel investors and the expansion of alternative investment options. ''We expect to take in the impact much better than the US ecosystem,'' he added.