Indian banks can endure global banking turmoil fallout: S&P Global Ratings

Mumbai, March 21, 2023 

Indian lenders 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, S&P Global Ratings said on Tuesday.

"Strong funding profiles, a high savings rate, and government support are among the factors that bolster the financial institutions we rate," the rating agency said.

S&P also said Indian banks had sufficient buffers to withstand losses on their sizable government securities portfolio due to rising interest rates.

The Reserve Bank of India has increased the policy repo rate by 250 basis points since May last year.

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

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.

S&P said that only a significant escalation of the current crisis would force it to change its view.

However, the decision to write down Credit Suisse's additional tier-1 bonds to zero after the lender's takeover by UBS may contribute to a higher cost of capital for domestic banks, S&P said.

[Reuters]