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Low presence of foreign banks saved our bank system, says RBI
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Low presence of foreign banks saved our bank system, says RBI
Indian banking system escaped unhurt from the global financial crisis because of the limited presence of foreign banks in the country, the Reserve Bank said.
“The direct effect of the global financial crisis on the Indian banking and financial system was almost negligible, thanks to the limited exposure to riskier assets and derivatives.
The relatively low presence of foreign banks also minimised the impact on the domestic economy,” RBI deputy governor Usha Thorat said in a presentation at Seoul, Korea.
However, due to the global crisis, there was reduction in foreign equity flows and the capital and forex markets were impacted. Also, the fall in global trade and output had hurt consumption and investment demand.
The RBI took a slew of measures to combat the crisis and eased liquidity in the system by reducing short term lending and borrowing rates (repo rate and reverse repo) and the rates at which banks borrow from RBI (cash reserve ratio).
The impact of liquidity easing and prudential measures was reflected in the credit growth in the year ended June 2009.
It was 15.8 per cent against 26.3 per cent in the previous year, Thorat said.
The credit growth during November 2008-May 2009 was higher than average for sectors like infrastructure, real estate, NBFCs, SME, agriculture and certain industries like iron and steel, she added.
Source:
http://www.mydigitalfc.com/news/low-presence-foreign-banks-saved-our-bank-system
“The direct effect of the global financial crisis on the Indian banking and financial system was almost negligible, thanks to the limited exposure to riskier assets and derivatives.
The relatively low presence of foreign banks also minimised the impact on the domestic economy,” RBI deputy governor Usha Thorat said in a presentation at Seoul, Korea.
However, due to the global crisis, there was reduction in foreign equity flows and the capital and forex markets were impacted. Also, the fall in global trade and output had hurt consumption and investment demand.
The RBI took a slew of measures to combat the crisis and eased liquidity in the system by reducing short term lending and borrowing rates (repo rate and reverse repo) and the rates at which banks borrow from RBI (cash reserve ratio).
The impact of liquidity easing and prudential measures was reflected in the credit growth in the year ended June 2009.
It was 15.8 per cent against 26.3 per cent in the previous year, Thorat said.
The credit growth during November 2008-May 2009 was higher than average for sectors like infrastructure, real estate, NBFCs, SME, agriculture and certain industries like iron and steel, she added.
Source:
http://www.mydigitalfc.com/news/low-presence-foreign-banks-saved-our-bank-system