Topic 3: SVB Crisis – Impact on World Economy, SVB Crisis and India, and Advantage to India

  • Impact on start-ups and Tech Jobs – according to the petition around 10,000 small businesses having accounts with SVB were unable to pay their employees and resulting in job loss.
  • The loss to the US tech industry set back US competitiveness by a decade or more.
  • Adverse effect on other small banks - As founders and management teams look out for safer havens, triggering the other pressure points.
  • Rising cost of money become vulnerable – Hidden risks of the banking sector become a concerned to many banks and which weakens the rising cost of money.


SVB CRISIS AND INDIA
  • India is in a better position
  • The Indian banks have negligible exposure to US lenders.
  • In 2022, Financial Stability Report RBI showed that domestic banks would be able to comply with minimum capital requirements even under severe stress scenarios.
  • Strong CRAR in 2023 the under-stress scenario it is evaluated projecting not less than 14.9%. The minimum requirement for CRAR for banks is 9% and adding counter-cyclical buffer requirements should be 11.50%.
  • Better NPAs – with the efforts to clean up asset quality and improve profitability Indian banks have cleaned their bad debts.
  • Lesser policy rate hikes by RBI than the increase in 10-year G sec yield.
  • Banks have improved their bond portfolios over the last six years by reducing the modified duration of their portfolios.


    • ADVANTAGE TO INDIA
  • A fall in US bond yields typically improves the appeal of higher-yielding fixed-income assets in emerging markets.
  • Falling US dollar rate along with SVB Crisis bring back big corporates to India those who have shifted to overseas lending due to the depreciation of the Rupee.


    • INDIAN STARTUPS AND SVB CRISIS



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