Business
Explained: Why Is RBI Keeping A Close Eye on Credit Suisse, Despite Its Small Presence In India?
Credit Suisse
India's Reserve Bank is reportedly keeping tabs on development related to Credit Suisse bank.
However, according to people familiar with the matter, the bank's small footprint in India makes significant impact improbable.
Credit Suisse's presence in India is limited, with just one branch and a 1.5 per cent share among foreign banks in the country. Its share of banking assets stands at only 0.1 per cent.
However, despite this limited presence, domestic banks and money market traders have taken a cautious stance and are avoiding any fresh counterparty exposure against the lender.
Reportedly, Credit Suisse's short-term government securities make up about 70 per cent of its assets in India.
Banks in the country have lowered Credit Suisse's internal rating, which has made it improbable for them to take fresh trading positions with the lender.
As a result, Credit Suisse will have to wait and watch for now, as the Indian banking sector remains wary of further exposure to the lender.
Credit Suisse, Switzerland's second largest bank, is the first major global bank to be thrown an emergency lifeline since the 2008 financial crisis.
After a continuous decline in the shares of Credit Suisse, worries over its collapse arose, which were allayed by the Swiss central bank intervening with a $54 billion lifeline.
Jefferies, a US-based brokerage, reported that Credit Suisse, with 60 per cent of assets funded in India from borrowings, holds only 0.1 per cent share of total Indian banking sector assets, estimated at approximately Rs 20,000 crore.
According to the brokerage, due to Credit Suisse's importance to India's banking industry, there will be more lenient evaluations of counterparty risks, particularly in the derivative market.
The Reserve Bank of India will closely monitor liquidity problems and intervene if necessary, according to the US brokerage firm.
"This may also lead to institutional deposits moving more towards larger/ quality banks," the brokerage firm said, reports Economic Times.
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