Current Balance Sheets Of Indian Banks In A Significantly Healthy Shape: HDFC
The current balance sheets are in a significantly healthy shape with overall net non-performing assets (NPA) at 1.3 per cent and capital adequacy at 16 per cent as of 30 September 2022, said HDFC Asset Management Company (AMC) in a research report.
The report stated that recent developments such as Silicon Valley Bank (SVB) crisis will have very limited risk in India considering the stringent regulations around liquidity coverage ratio, HTM investment proportion and capital adequacy requirement.
Further, the Indian banking system has gone through a multiyear cleanup exercise prior to the pandemic, it added.
Risk-off sentiments triggered by these events are likely to result in the US dollar strengthening against most currencies including the Indian rupee.
However, India’s adequate foreign exchange reserves could help curb volatility. Over the medium term, correction in commodity prices especially Oil and resilient services exports are likely to support the Indian rupee as the situation stabilises.
While talking about the monetary policy committee (MPC), the report mentioned that it is likely to consider these developments and risks when they meet in April 2023.
To recall, the Reserve Bank of India (RBI) has already tightened over 300 bps by raising the repo rate by 250 bps and draining out surplus liquidity.
Also, there are no signs of overheating in the domestic economy despite resilient growth, it mentioned.
"Thus, in a highly uncertain global environment, there is a strong case for RBI to pause the rate hiking and wait till June 2023 to decide upon the future course of action," the report stated.
Notably, by that time, there will be more clarity on the progress of the monsoon, the impact of already done rate hikes, the direction of the US Fed and the impact of aforesaid events on global growth and inflation.
