Banking crisis and its impact on Indian economy
Silicon Valley Bank
The technology, life science and healthcare, private equity, venture capital, and luxury wine sectors
all benefit from Silicon Valley Bank's commercial banking services, expertise, and insights as the bank
of choice for the most forward-thinking businesses and investors in the world. With SVB Capital, SVB
Private, and SVB Securities, Silicon Valley Bank is one of SVB's core businesses and operates in
innovation hubs all over the globe. Silicon Valley Bank assists in meeting the special requirements of
its dynamic, quickly-expanding, and creative clients by providing worldwide commercial banking
services.
• The US Federal Reserve's decision to raise interest rates led to a decline in investors' appetite
for risk, which in turn led to the collapse of Silicon Valley Bank. As a result, investors began to
withdraw funds from SVP in order to meet their liquidity needs.
• A series of incidents led to Silicon Valley Bank (SVB) Financial Group's fall. Some SVB
customers are now experiencing a cash shortage as a result of the US Federal Reserve raising
interest rates.
• SVB announced a stock sale while selling its bond portfolio at a loss. But the equity deal fell
through, and SVB entered receivership.
• The financial industry and startup scene are being significantly impacted by the failure of
Silicon Valley Bank (SVB) Financial Group. The potential for bank runs, in which customers or
investors panic and begin withdrawing their deposits, is one of the main worries. It might
scare away clients from other institutions, which would undermine trust in the financial
system.
Impact on Indian Economy
According to Kranthi Bathini, an equity strategist at WealthMills Securities, "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."
Since it's a global contagion, there will be some effect on market sentiment in the short to
medium term, but it won't have a long-term impact on Indian equity markets.
Many of the most successful startups in India, including Flipkart, Ola, and Zomato, have
benefited from the financing and banking services provided by SVB. SVB has also been crucial in
assisting Indian startups enter the US market by providing them with the infrastructure and
assistance they need to establish a business in Silicon Valley.
Consider diversifying your financial connections to lessen your exposure to any one bank if you
are an Indian startup with money deposited with SVB. This could entail opening accounts with
several banks or investigating alternative financial options like digital banks or fintech startups.
Credit Suisse Group
A worldwide investment bank and provider of financial services, Credit Suisse Group AG was
founded and is headquartered in Switzerland. It has offices in all of the world's important
financial hubs and its headquarters are in Zürich. It offers services in investment banking, private
banking, asset management, and shared services. It is renowned for its stringent banking secrecy
and customer confidentiality. It is regarded as a globally significant systemically essential bank by
the Financial Stability Board. The US Federal Reserve's main dealer and foreign exchange
counterparty is Credit Suisse.
• Due to Credit Suisse's size and importance, its potential collapse could lead to a wider
financial crisis, impacting the world economy. As a result, when the bank released its
annual report, it disclosed a "material weakness" related to its financial reporting, raising
concerns in the global market and causing a 30% decline in the bank's share price.
• The failure of Grensill Bank ($10 billion) and Archgeos Capital Management ($5 billion),
which resulted in significant losses for the bank, dealt Credit Suisse its final setback. Due
to all of these, wealthy investors in Credit Suisse began withdrawing their funds in 2022,
which had a significant negative impact on asset management, which was their largest
share-bearing company.
• The worth of Credit Suisse's stock dropped precipitously.
Impact on Indian Economy
India's banking system is not anticipated to be significantly impacted directly by the Credit Suisse
problem, but the nation's banking sector will closely monitor the liquidity concerns.
The bank is the 12th largest foreign bank in India with assets totaling Rs 20,000 crore. According to
experts, there may be some effects on India's information technology sector.
