While recognizing the fact that Indian banking consumer sentiments are becoming very fragile due to concerns raised by many after Yes Bank fiasco, the Reserve Bank in an official communication reiterated that depositors’ money is safe and it is closely monitoring all banks.
The RBI further said that concerns about the safety of deposits in banks are based on a flawed analysis. “Concern has been raised in certain sections of media about the safety of deposits of certain banks. This concern is based on analysis which is flawed. Solvency of banks is internationally based on Capital to Risk-Weighted Assets (CRAR) and not on market cap,” the central bank said in a tweet.
“RBI closely monitors all the banks and hereby assures all depositors that there is no such concern of the safety of their deposits in any bank,” its second tweet said.
Earlier, echoing similar sentiments, Chief Economic Adviser Krishnamurthy Subramanian said Indian banks are well capitalised and there is no reason to worry, adding that it is a wrong method to assess a lender’s health based on the ratio of deposit to m-cap (market capitalisation).
“What I want to emphatically state that the m-cap ratio is a totally incorrect metric for assessing the safety of the banks. No banking sector expert or banking regulator uses this measure,” Subramanian said.