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Credit Suisse crisis: Indian banks safe

Express News Service

MUMBAI:  The crisis at Credit Suisse will not have any major impact on the Indian financial and banking system as the exposure of the Swiss banking giant to Indian banks is insignificant. Switzerland’s second-largest bank has just one branch in the country and has assets worth Rs 20,700 crore which amounts to 0.1% of assets in the country’s banking system, according to a report by Jefferies.

“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,” noted the report. “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,” it added.

Even among the foreign banks operating in India, the share of Credit Suisse, which is the 12 largest foreign bank, is relatively small. HSBC is the largest foreign bank in India with total assets of Rs 2,47,300 crore.
“Indian banking sector is unlikely to have any significant impact from the events unfolding at SVB and Credit Suisse. Indian banks are subjected to stricter rules by the regulators compared to the banks in US and Europe. For example, Indian banks are required to provide for unrealised Mark-to-Market losses which is not the case with US or European banks,” Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers told this newspaper.

“After 2014, banks have seen stringent provisioning and capital requirements, making the Indian banking system strong enough to face any financial turmoil,” Hajra added. Credit Suisse’s deposit base is smaller at Rs2,800 crore, forming around 20% of total liabilities. While the share of shorter-term liabilities is high, assets are mostly in liquid G-Secs. Jefferies said it would watch out for liquidity issues and any rub-off on counter-party risk assessment on Indian banks, especially in derivatives.

Foreign banks make up only 6 per cent of banking assets, with the Swiss lender accounting for 1.5 per cent of that share. Despite their limited presence, they are active in the derivative markets (forex and interest rates) where they have up to 50 per cent share.

Earlier in the day, Credit Suisse said it would borrow up to $54 billion from the Swiss central bank to shore up liquidity and investor confidence after a slump in its shares intensified fears about a global banking crisis. The note also highlighted that Credit Suisse is more relevant to the Indian financial system than the Silicon Valley Bank, which collapsed recently.

Bank crisis

Rs 2,800 cr
Deposit base of Credit Suisse which is around 20% of total liabilities

Rs 2,47,300 cr
Total assets of HSBC, the largest foreign bank in India

Rs 20,700 crore
Total assets of Credit Suisse in India

Share of assets of foreign banks in Indian banking assets

Share of assets of Swiss banking giant in India’s banking system