RBI looking at Indian banks’ business models “more closely”, says Shaktikanta Das

Poor business models may have triggered crisis in U.S. banks, Reserve Bank of India looking at Indian banks’ business models “more closely”, says Governor Shaktikanta Das

Reserve Bank of India (RBI) Governor Shaktikanta Das on April 27 said the Reserve Bank is having a closer look at domestic lenders' business models as it feels that poor strategies can trigger a crisis.

The RBI Governor also said that the recent developments in the U.S., which has seen the implosion of lenders like Silicon Valley Bank and a rush to limit the contagion of stress across the system, may be because of poor business models.

He added that Indian banks have been able to stay resilient and have not been impacted adversely by the “recent sparks of financial instability seen in some advanced economies” courtesy the work done in this aspect by RBI and the banks themselves.

“The recent developments in the US raise a question whether the business model of individual banks that have faced challenges whether the business models were right,” Mr. Das said.

“The RBI has started looking at the business models of banks more closely … deficiencies (in it) can spark a crisis,” Mr. Das said, speaking at the inaugural global conference on financial resilience organised by the College of Supervisors which the central bank started last year.

Business models can sometimes create risks in certain parts of the balance sheet of a bank which going forward can blow up into a bigger crisis, Mr. Das said.