RBI Policy
Need to ensure episodes of crisis in banks are less frequent
This story was originally published at 15:09 IST on 9 April 2025
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--RBI Swaminathan on IndusInd Bk: Needn't speculate, will await audit report
--RBI Swaminathan on IndusInd Bk:Supervisory tools improve with every crisis
--RBI Malhotra on IndusInd Bk: Would not like to get into individual entities
--RBI Malhotra on IndusInd Bk: Need to ensure such events are less frequent
MUMBAI – Answering a question on three major crisis in the banking system--New India Co-operative Bank, IndusInd Bank and Aviom India Housing Finance--Reserve Bank of India Governor Sanjay Malhotra said that the banking system was very large with too many players, and "such episodes will happen". At a system level, Malhotra said that the banking system is secure and resilient.
However, it is important that such episodes are less frequent, he said. "I won't call them total failures, these are episodes, they are not even failures. Episodes will happen, we have to ensure through various means that these events, incidents happen less frequently. For that we have various tools, supervision, the banks have multiple layers. So we have to work together and try to improve the systems," Malhotra said at the post policy press conference on Wednesday. Although he did not comment on any specific entity, he said that the RBI has system in place to detect inconsistencies as early as possible.
In January, RBI filed an application with a company tribunal to initiate bankruptcy proceedings against Aviom India Housing Finance. RBI had superseded the board of the housing finance company due to governance concerns and payment defaults. The next month, the central bank barred New India Co-operative Bank from giving fresh loans and accepting deposits on account of supervisory concern. It had also directed the bank not to allow the withdrawal of any amount from the savings bank or current accounts but can set off loans against deposits.
On Mar. 10, IndusInd Bank reported some descripencies in the accounts of its derivative portfolio. The review estimated an adverse impact of about 2.35% of the bank's net worth as of Dec. 31, the bank had informed exchanges. As of Dec. 31, IndusInd Bank's net worth was INR 651.02 billion. As such, an adverse impact of 2.35% amounts to about INR 15.30 billion.
RBI Deputy Governor Swaminathan J. said, "We never waste a good crisis, there will be learnings. We'll get better as each episode will plays out. It is our intention to minimise (such episodes) and more importantly ensure customer remain protected." He added that if there are any lapses then they will be dealt with accordingly. He said that there is no need to be speculative now. End
Reported by Kshipra Petkar
Edited by Akul Nishant Akhoury
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