Indian banks immune from liquidity crisis in West: Govt officials

The government is keeping a close watch on the banking crisis in the West but says India will not be affected as it strengthened its oversight and regulation after its own NPA crisis last decade. A top government official told Business Standard that India has already paid the price for its crisis and implemented systems to prevent a liquidity crunch like the Western banks. The official spoke on the condition of anonymity. Another official said that the Indian banks had improved their financial health since March 2018, with better asset quality and profitability. The gross NPA ratio of Indian banks declined from 11.2 percent in March 2018 to 5.0 percent in September 2022, while the CRAR improved from 13.8 percent to 16.1 percent in the same period. The government closely follows the developments in the West, where several regional banks have failed due to liquidity concerns. One reason for their troubles is their considerable investments in US treasuries, which turned sour as the Fed raised interest rates to curb inflation. On Monday, JP Morgan Chase agreed to buy First Republic Bank in a deal brokered by the US government after regulators seized the latter’s assets. This follows the failures of Silicon Valley Bank and Signature Bank in March.