Report liquidity drain in advance: Rajan to MNC banks

Expecting global banks to weather the current turmoil, RBI Governor Raghuram Rajan today asked them to keep the Indian central bank informed about any liquidity drain from their operations here.
"I do not see prima facie a case to start getting overtly worried at this point about the health of global banks," he said at a banking conference organised by CII.
"We are in touch with the players in the system, and if there is evidence of a drain of liquidity from local branches of foreign banks, we certainly would expect to be informed of such situations."
The comments come amid RBI's persuasion of global banks to operate as wholly-owned subsidiaries in the country rather than their current branch model.

The flight of money in times of a crisis is one of the biggest reasons why RBI wants them to operate as locally incorporated units, but only four banks have so far applied for it.
Speaking on the stress for the banking majors, Rajan today flagged concerns on possible loan defaults on depressed oil prices and the Chinese slowdown "even though we do not know the magnitude for the latter".

There are also worries surrounding the German banking major Deutsche Bank and the Coco bonds, he said.
"But to my mind, unless this persists longer, I am not excessively worried," he said, adding that the heightened capital requirements enforced after the 2008 financial meltdown will also be a source of help.

On domestic banking, Rajan said that after having kick-started the process of differentiated banking with payments banks and small finance banks, RBI is studying the concept of 'wholesale bank' now.
"We are contemplating that... We are studying it. I have asked our staff to look at the issue of wholesale banks and we will see what niche they could occupy and whether there is strength in that," he said.