letter to banks from RBI Governor Shaktikanta Das on the ongoing crisis in the US financial sector
While delivering the annual KP Hormis (Federal Bank Founder) Memorial speech in Kochi today, RBI governor Shaktikanta Das warned banks against any accumulation of asset-liability mismatches, stating that both are harmful to financial stability. Additionally, Das made a suggestion that these discrepancies may be the source of the continuing problem in the US financial sector. The worst of the inflation is behind us, he said, and the domestic financial system is solid.
Das stated, "We have nothing to fear as our external debt is manageable and thus appreciation of the greenback does not pose any problem for us," in the midst of ongoing exchange rate volatility, particularly due to the excessive appreciation of the US dollar, and its impact on the ability of nations to service their external debt.
Climate change financing das
The governor spent the most of his address on India's G20 presidency and urged the group of the world's 20 biggest economies to make more concerted efforts to aid those nations that face substantial external debt risks as a result of the strengthening US currency. Moreover, he said that the coalition must finance the most vulnerable nations in a warlike manner.
Regarding the US banking crisis, where two mid-sized banks (Silicon Valley Bank and First Republic Bank) each had balance sheets worth over USD 200 billion last week, he said that the crisis' persistence highlights the need for strict regulations that prioritize sustainable growth rather than an excessive buildup on either the asset side or the liability side.
Private cryptocurrency risks
Without identifying the US bank, Das said that, on the surface, one of them had a side operation with unmanageable deposits that exceeded their assets. Das, a vocal opponent of private digital currencies, said that the current US banking crisis amply demonstrated the dangers that private cryptocurrencies pose to the financial system.