Global banking crisis: SBI, other Indian banks reportedly asked to share bond portfolio with government

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Investing too much in long-term bonds that lost value as the US Federal Reserve raised interest rates, left Silicon Valley Bank short of cash with a loss and led to its crash. It triggered a banking crisis which dragged down Signature Bank and Credit Suisse, which also had to write off AT1 bonds to be bailed out.

As the SVB quake’s tremors are felt globally, the Indian government wants public sector lenders to share details of their investments in bonds.

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Along with the State Bank of India, lenders with large bond portfolios such as Bank of Baroda and Punjab National Bank, will have to provide data.

But reports suggest that this is only for keeping a track of investments, as a limit on availability and sale of bonds in India prevents an SVB-like fiasco.

As the global banking system is in turmoil, triggering a drop in stock prices for Indian lenders, the Finance Ministry is meeting bankers on March 25.

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No cause for concern yet

But the meeting is just to build confidence, like a review meeting conducted by the Prime Minister amidst pandemic pressure.

The Reserve Bank of India has also been meeting lenders to make sure that they have adequate capital.

Indian banks are required by the RBI to have 18 per cent of their deposits in statutory liquidity ratio, which means that they should be in cash or gold.

This helps as Signature Bank’s cash assets were down to 5 per cent while they hit 7 per cent for SVB, compared to a 13 per cent average for the sector.

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