Will Indian Banks Follow US Banking Crisis?

According to Shanti Ekambaram, President of Consumer Banking, Kotak Mahindra Bank Ltd., the banking system in India has sufficient liquidity and will likely not follow US Banking Crisis. Indian banking sector looks resilient to global market volatility, says Ekambaram. 

Ekambaram stated that the Indian banking sector appears to be largely immune to the recent market volatility seen in the United States and Europe. In an interview with CNBC, the expert explained that India’s banking system is structured differently from those in the US and Europe, making it less vulnerable to the same kinds of risks.

What makes Indian banking less volatile?

Ekambaram then went on to explain that Indian banks have largely invested in government bonds, which are subject to caps on how much can be held to maturity. This, along with the fact that most of the deposits in India are retail and the duration of the deposits is relatively short, makes Indian banks less susceptible to the kind of risks seen in other countries.

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She added that the Indian banking sector has seen strong credit growth for the past 18 to 24 months, with banks deploying funds into credit. This, along with the government’s commitment to spending on capital expenditure, is expected to spur growth and keep the sector stable.

Does India stand completely shielded? 

Ekambaram, however, did note that there are some factors that could impact the sector. These factors include macros and liquidity in the banking system. Thus, she stated that the overall outlook for Indian banks remains positive. The macro in India is currently in reasonable shape, and the government’s commitment to capital expenditure is expected to support growth.

Overall, the head of consumer banking at Kotak believes that the Indian banking sector is looking very different from what has been seen happening in the U.S. and European Union, and is more resilient to global market volatility.

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