CB News
Effects on the safety of depositors’ funds in India
While the failures of SVB and Signature Bank raise concerns about the safety of depositors’ funds worldwide, Indian banking experts do not foresee similar failures. India has a system where local banks have a different balance sheet format. Banks in India have a structure that prohibits large-scale withdrawal of deposits.
In contrast to the United States, bank deposits in India are dominated by household savings. In the United States, most bank deposits come from businesses. In addition, State Bank of India, ICICI Bank and HDFC Bank have been designated as domestic systemically important banks (D-SIBs) by the Reserve Bank of India, which requires them to reserve more capital and provisions to guarantee its operations. This rating ensures that these banks are better positioned to manage potential risks and are less likely to fail.
Negative effect on Indian industry
While the impact of the bank collapse in India may be modest, the global spread of the crisis could restrict capital flows to India and other emerging nations. This could have a negative impact on the Indian economy and other economies dependent on capital inflows.
According to experts, the impact of the bank collapse in India would be modest, mainly affecting software startups and IT companies. Due to the banking crisis, these companies may find it difficult to obtain financing, as they are highly dependent on foreign investors. The impact on other areas of the Indian economy is expected to be less.
Positive effect
The SVB incident has sparked fears of a financial catastrophe resulting in a drop in crude oil prices. Considering that India imports most of its oil needs, the fall in crude oil prices is seen as beneficial for India. But while a reduction in crude oil prices may have a favorable effect on the Indian economy in the short term, a sustained fall in crude oil rates could have severe effects on the Indian economy, which is heavily dependent on oil imports.
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