Nirmala Sitharaman to Hold Bank Meeting on UK Crisis

Nirmala Sitharaman to hold a meeting with the banks of public sectors.

Central Finance Minister is said to hold a meeting with the heads of the Public Sectors Banks (PSBs) to take a report on the performance due to the failure of a few banks in the US and facing liquidity crisis.

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The Silicon Valley Bank failure, US

The Silicon Valley Bank in the US is the 16^th largest bank in the US, but surprisingly they hold on two branches. New startups walk in to get their investment deal signed and approved by them. And there stays a long queue at the bank. Locals also say they hold billions of dollars as deposits inside the bank, but they still have only two branches.

• On March 10 FBI seized the bank, and the government declared it the second most disastrous bank failure in the history of the US. The reason behind this is a sudden and swift collapse, but within 48hrs the bank declared a cash crunch.
• They tried to raise money by any means, like selling shares or selling the bank, but nothing happened.
• When the investors saw the bank’s activities, they got a glimpse of the bank’s domination to bankruptcy, so they also took quick action and cleared their hands from the bank in the hope of not being good soon.
• The Federal Government assured the depositors that their deposits would be accessible by Monday, March 13.

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Impact on Indian Banks:

• Industry professionals suggest that although the global repercussions of the Silicon Valley Bank’s collapse are beginning to emerge, the Indian banking sector is not expected to experience any major spillage. Nonetheless, the market is expected to experience some impact on its sentiment.
• Market experts are saying there Indian Banking system will not get affected by this, and we are more systematic and regulated by RBI.
• The global contagion may impact the market sentiment in the short to medium term, causing concerns for the market. However, it is anticipated not to have any major long-term effects on the Indian equity market’s performance.
• Bhavesh Shah, Managing Director – Of consumer and Healthcare Banking at Equirus, said, “the Indian banking system has its inherent strengths and won’t be impacted much as Silicon Valley Bank goes through its troubles. There would be an impact on the stock market, though, as the sentiments get imported into India with the fear that this may lead to a financial crisis. The startup ecosystem would also be impacted and may lead to further stiffening of funding at least temporarily.”

According to reports, the UK government is taking swift action to mitigate the impact of the Silicon Valley Bank’s collapse. The British finance minister, Jeremy Hunt, has confirmed he is collaborating with Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey to alleviate any potential negative consequences from the turmoil affecting the UK branch of Silicon Valley Bank. Reuters has documented Hunt’s statement.

Over 250 CEOs of technology companies located in the UK composed and submitted a letter to Hunt, urging the government to partake in an intervention, according to recent reports. Additionally, specialists suggest that the collapse of SVB may heighten apprehension among Chinese stock investors. This is evident in the decrease of China’s CSI300 Index by 4% and Hong Kong’s Hang Seng plummeting by 6% after China announced a modest economic growth target of approximately 5%, devastating the prospects of a significant stimulus.

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Holding a meeting on such a topic depicts how India is serious about every global matter which might affect our economy. India is the largest democracy in the world, and even small events can greatly impact us and the world.

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