According to a note published by the brokerage company Anand Rathi, the stringent regulation, supervision, and accounting requirements that are imposed on Indian banks make it highly unlikely that a shock comparable to the one that was experienced by Silicon Valley Bank (SVB) will occur in India.
Indian banks, in contrast to their counterparts in the United States, are required to account for all unrealized mark-to-market losses that occur outside of their held-to-maturity (HTM) inventories. According to the report, the majority of private sector banks in India have an HTM portfolio that is on the smaller side.
According to another part of the report, the collapse of two banks in the United States will not have a significant impact on the earnings forecast of publicly traded businesses in India.
According to the opinion of the company, the drama surrounding SVB will have a beneficial effect on the financial markets in India. The outlook for interest rates has improved as a direct consequence of the events that have taken place. This may result in an increase in the price-to-earnings multiples that are applied when valuing Indian stocks. According to the report, the authors of the study continue to hold the belief that the Indian financial markets will produce returns of approximately 12%.
The domestic brokerage firm also said in its note that the Reserve Bank of India (RBI) will probably adopt a more dovish monetary policy approach in the upcoming April MPC meeting. This would be similar to what the Federal Reserve would do in its meeting of the Federal Open Market Committee (FOMC), which will begin on Tuesday.
It was further stated that the prognosis for the environment of the country’s interest rates is more optimistic than it had been previously.
According to the report, “the anticipated decline in interest rates, including bond yields, would reduce the discounting rate on future earnings of companies, which would have a positive effect on the valuation of Indian equities over the medium- to long-term.” This prediction was made in light of the fact that bond yields would also be affected by the anticipated reduction in interest rates.
The failure of SVB was the first domino to fall, which initiated a chain reaction of failures in the banking industry. Approximately forty-eight hours after the problems were discovered at SVB, Signature Bank became the second bank to fail as a result of this disaster. Then, shortly after that, there was an emergency at First Republic Bank.
According to Reuters, which cited a statement issued by the Federal Deposit Insurance Corporation (FDIC) on Sunday, New York Community Bank has reached an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase a sizeable portion of the bankrupt Signature Bank in a transaction valued at $2.7 billion.
Beginning on Monday, all forty of Signature Bank’s locations will be rebranded as Flagstar Bank locations. New York Community Bank has a number of subsidiaries, including Flagstar. According to a report by Reuters, the transaction will include the acquisition of $38.4 billion worth of assets from Signature Bank. This represents a little more than a third of the total assets held by Signature when the bank failed a week ago.
The FDIC has stated that loans totaling $60 billion belonging to Signature Bank will continue in receivership. According to the report, it is anticipated that these loans will eventually be sold off.
