The RBI Governor on Friday warned against any kind of asset-liability imbalance. He said that both types of imbalance are harmful for financial stability.
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Reserve Bank of India Governor Shaktikanta Das (RBI Governor Shakikanta Das) on Friday told banks not to repeat the mistake that America’s Silicon Valley Bank (Silicon Valley Bank) Did it, which has to be seen on such days. The RBI governor on Friday warned against any kind of asset-liability imbalance. He said that both types of imbalance are harmful for financial stability. He indicated that the ongoing crisis in the American banking system has arisen because of such imbalances.
India need not fear
Speaking at the annual KP Hormis (Founder of Federal Bank) Memorial Lecture in Kochi, the Governor said that the domestic financial sector is stable and the bad phase of inflation is behind. Regarding the impact on the ability to repay the external loan due to the ongoing volatility in the exchange rates, Das said that we have nothing to fear, as our external debt is manageable. The strength of the dollar is not a problem for us. Significantly, due to the increase in the value of dollar, the challenges in front of countries with high external loan risk have increased.
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After all, how important are strong rules?
On the US banking crisis, he said it shows the importance of strong regulations that focus on sustainable growth rather than excessive asset or liability creation. Last week, two mid-sized banks in the US – Silicon Valley Bank and First Republic Bank were closed. Das said that the current US banking crisis clearly shows the risk of private cryptocurrencies to the financial system. He has been an open critic of private digital currencies.
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G20 countries come forward
Most of the Governor’s speech focused on India’s G20 presidency. He said that the Group of 20 largest economies of the world (G20) should make coordinated efforts to help countries with high external debt risk due to the rise in the value of the dollar. He also said that the G20 should provide climate change financing to the most affected countries.
