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Below the Indian Banking sector outlook from Ajit Kabi, Banking analyst at LKP Securities

The current global banking crisis, especially Credit Suisse and few USA Banks is likely to bring some regulatory measures across the global banking system. The Auditing and financial reporting may be more stringent along with addressing liquidity and duration risk in a strict way. Post Great Financial crisis, the regulatory changes have put more emphasis on Credit risk, however these crises are exposing other risk factors like Liquidity, duration and market risk. Liquidity infusion of $54bn by the central bank of Switzerland into Credit Suisse and UBS acquisition is a welcome move. Nevertheless, it is a reactive action post the crisis unfolded. We expect the regulators and external auditors to be proactive to safeguard shareholders' wealth.

Additionally, We believe there is no major impact on the Indian Banking sector. The concept of Liquidity Coverage Ratio introduced by RBI is likely to handle liquidity pressure. Public banks are more immune to liquidity risk as their LCR is higher as well as a low CDR (credit deposit ratio). The loan to assets ratio for Indian banks is around 36% against 65% for SVB. Additionally, the investment is more into Govt. Sec on SLR account. The deposit base for Indian banks is very granular as Top 20 depositors contribute ~9% of total deposits.

The proactive risk management by the Indian Regulator is likely to protect the balance sheet under any adverse scenario. Therefore, we don’t see any material impact on Indian Banks except poor investment sentiment across the investor fraternity.

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