As per analysts, Indian banks are well-placed due to a strong regulatory framework.
After two American banks - Silicon Valley Bank and Signature bank - collapsed, Zerodha co-founder and CEO Nithin Kamath said that such crises teach us to distribute funds across a bunch of banks. Taking to Twitter on Monday, Mr Kamath, who runs India's largest stock broking platform, noted that many things can go wrong when running a business. He stated that an underrated skill set for running a business is being pessimistic, adding that one should consider everything a risk and do everything one can to mitigate it.
"Every business will be exposed to a black swan event at some point; the idea is to survive those," Mr Kamath said. “The lesson from SVB or Yes Bank in the Indian context is to have funds, especially working capital, distributed across a bunch of banks,” he added.
Take a look below:
Mr Kamath's tweet comes days after the dramatic failure of Silicon Valley Bank, which was the biggest bank collapse in the United States since the 2008 financial crisis. It also comes after US regulators closed New York-based lender Signature Bank.
The move roiled global markets and stranded billions of dollars belonging to companies and investors. According to the BBC, following the collapse bank shares in Asia and Europe slumped, despite reassurances from US President Joe Biden that America's financial system is safe.
Also Read | Money Can Buy Happiness, Says A Study By Nobel-Prize Winning Economist
Investors fear other lenders may still be hit by the fallout. It has also led to the speculation that America's Federal Reserve will now pause its plans to keep raising interest rates, designed to tame inflation.
But Mr Biden has said that people and businesses that had deposited money with Silicon Valley Bank would be able to access all their cash from Monday, after the government stepped in to protect their deposits in full. Not only will taxpayers not be liable for covering the deposits, but "the management of these banks will be fired," he said.
In India, however, analysts have said that Indian banks are well-placed due to a strong regulatory framework. "The effect of SVB's collapse on Indian startups could be minimal," Ruchit G Garg, the chief executive of Harvesting Farmer Network, told NDTV.