As the fallout from the collapse of Silicon Valley Bank is starting to spread around the world, experts say the Indian banking system is unlikely to witness any major spillover effects. However, there will be some impact on the sentiment of the market.

“The collapse of SVB will not have any effect on the Indian banks as the Indian banking system is more insulated and regulated under the supervision of RBI,” said Kranthi Bathini, Equity strategist at WealthMills Securities.

As far as markets are concerned, there will be some impact on the sentiment of the market in the short to medium term as it’s a global contagion, but will not affect Indian equity markets in the long term, Bathini said.

Bhavesh Shah, Managing Director – 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.”

Friday’s dramatic failure of the SVB, which focuses on tech startups, was the biggest since the 2008 financial crisis.

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Earlier, the CEO of Kotak Mahindra Bank, Uday Kotak, had said that high-interest rates are bound to impact weak banks. “When interest rates move up 500 bps from zero in a year, an accident was waiting to happen somewhere,” he said in a tweet.

Meanwhile, as per reports, the UK govt is rushing to minimise the damage from the SVB collapse. British finance minister Jeremy Hunt said on Sunday he was working with Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey to “avoid or minimise damage” resulting from the chaos engulfing the UK arm of Silicon Valley Bank, Reuters reported.More than 250 UK tech firm chief executives signed a letter addressed to Hunt on Saturday calling for government intervention, it reported.

Similarly, as per the experts, the SVB collapse could increase anxiety among China’s stock investors. Last week, China’s CSI300 Index fell 4%, while Hong Kong’s Hang Seng plunged 6%, as China set a modest target for economic growth this year of around 5%, dashed hopes for a big stimulus.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)


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