Indian Banks Can Endure Contagion Effect Of Global Turmoil: S&P Analysts have said that Indian banks are now in a better position to withstand stress given their current capital levels and healthy asset quality

By Teena Jose

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Pexels

The S&P Global Ratings, on Tuesday, stated that Indian lenders and rated finance companies (NBFCs) are capable of enduring any potential contagion effects emanating from the U.S. banking turmoil and UBS's recent takeover of embattled Swiss lender Credit Suisse given their manageable exposures to their global counterparts, according to a Reuters report.

"Strong funding profiles, a high savings rate, and government support are among the factors that bolster the financial institutions we rate. Also, Indian banks had sufficient buffers to withstand losses on their sizable government securities portfolio due to rising interest rates," the ratings agency said in a statement.

The report also added that, "The secondary impacts are 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."

Analysts have said that Indian banks are now in a better position to withstand stress given their current capital levels and healthy asset quality, according to previous media reports.

Furthermore, the report said that the support for deposit franchises comes from the banks' wide branch networks, sizable retail customer base, and deposit insurance for small savers of up to INR 5 lakh for deposits with individual banks. Moreover, about 60% of the banking system is government-owned, bolstering the perceived safety of bank deposits.

Stress tests conducted by the central bank and released as part of the Financial Stability Report (FSR) in December have also shown that banks would be able to comply with minimum capital requirements even under adverse scenarios. As per the rating agency findings, only a significant escalation of the current crisis would force it to change its view.

Wavy Line
Teena Jose

News Desk Reporter with Entrepreneur India

Teena is a post graduate in financial journalism. She has an avid interest in content creation, digital media and fashion.

Related Topics

Business Plans

How to Change Careers: A Step-by-Step Guide

Want to make a career change without compromising your finances or future? Check out this step-by-step guide on how to change careers to learn more.

Branding

How I Made Money From My Book Without Selling a Single Copy

Did you know you can make money with a book without selling copies? Here's exactly how I did it.

Living

6 Things Successful People do Before 9 a.m.

Doing something useful when you feel least like doing anything almost guarantees a productive day.

News and Trends

Home Rental Startup NestAway Sold to Aurum PropTech at Steep 95% Valuation Cut

Aurum has said that it will infuse Rs 30 crore to enable NestAway's business to remain stable.

News and Trends

KL Rahul Invests In Sequoia-Backed Hyugalife.com

KL Rahul, who is currently recovering from a sports injury has joined hands with HyugaLife.com to inspire every Indian to be their healthiest and best self with its all-encompassing platform

Productivity

Tim Ferriss's Favorite Productivity Hacks

There are only 24 hours in a day. Here's how the best-selling author and serial entrepreneur uses his.