The RBI further said that concerns about the safety of deposits in banks are based on a flawed analysis.
Allaying concerns raised by many after Yes Bank fiasco, the Reserve Bank on Sunday 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 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 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.
A day after imposing a 30-day moratorium on Yes Bank and capping withdrawal limit at Rs 50,000, the RBI on Friday evening had issued a draft reconstruction scheme for the private sector lender. As per the RBI’s draft reconstruction scheme, State Bank of India will pick up 49 per cent stake in the crisis-ridden Yes Bank under a government-approved bailout plan.