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Effects on the safety of depositors’ funds in India
While the bankruptcies of SVB and Signature Bank have raised concerns about the safety of depositors’ funds worldwide, Indian banking experts do not foresee similar failures. India has a system where local banks have a different balance sheet format. India Banks have a structure that prohibits large-scale withdrawals of deposits.
Unlike the United States, bank deposits in India are dominated by household savings. In the United States, most bank deposits come from corporations. In addition, State Bank of India, ICICI Bank and HDFC Bank have been designated as national systemically important banks (D-SIBs) by the Reserve Bank of India, which requires them to set aside more capital and provisions to ensure their operations. This rating ensures that these banks are better positioned to manage potential risks and are less likely to fail.
Negative effect on Indian industry
While the impact of the banking collapse in India may be modest, the global spread of the crisis could restrict capital flows to India and other emerging nations. This could have a negative impact on the Indian economy and other economies dependent on capital inflows.
According to experts, the impact of the banking collapse in India would be modest, mostly affecting software startups and IT companies. Due to the banking crisis, it can be difficult for these companies to get financing, as they are highly dependent on foreign investors. The impact on other areas of the Indian economy is expected to be less.
The SVB incident led to fears of a financial catastrophe that would lead to a decline in crude oil prices. Considering that India imports most of its oil needs, a decline in crude oil prices is considered beneficial for India. But while a reduction in crude oil prices may have a favorable effect on the Indian economy in the short term, a sustained decline in crude oil rates could have severe effects on the Indian economy, which is heavily dependent on oil imports.