Banking system safe, IndusInd crisis an episode & not failure: RBI Guv

Reserve Bank Governor Sanjay Malhotra on Wednesday said that the cases of failure of cooperative banks in the last 7-8 years are very small compared to the overall size

Asserting that the Indian banking system is safe, secure and robust, Reserve Bank Governor Sanjay Malhotra on Wednesday said crises in some banks and a housing finance company are 'episodes' and not 'total failure'.

He was responding to a question about whether there were larger systemic concerns around the accounting lapses at IndusInd Bank and the failure of the Mumbai-based New India Cooperative Bank and Aviom India Housing Finance Pvt Ltd.

Without getting into specifics of any individual cases, Malhotra said, "St system level...we are very very safe, secure and robust and the system is resilient."  In this large system with number of players with almost 10,000 NBFCs and around 1,500 cooperative banks and cases of failure of cooperative banks in the last 7-8 years are very small compared to the overall size, he said.

"So these things will happen. Our effort is to minimise the impact and minimise them...I would not call them total failure, these are episodes," he said.

Malhotra underlined that the RBI's multi-layered regulatory framework that includes routine inspections, compliance audits, and internal monitoring mechanisms ensure that the financial system remains stable and responsive.

Speaking on the issue, Deputy Governor Swaminathan Janakiraman said RBI will deal appropriately with those accountable if it finds there were lapses.

"We never waste a good crisis, and there will be learnings," Swaminathan said, adding, "It is our intention to minimize and ensure that the customers remain protected even if accidents play out."  In each of these crises, RBI has taken adequate steps to ensure that customer inconvenience is minimized and customer money is protected to the extent possible, he added.

Private sector lender IndusInd Bank on March 10 had disclosed certain discrepancies identified by the lender in its account balances relating to its derivatives portfolio.

As per an estimate, Rs 2,100 crore discrepancy in accounting may impact 2.35 per cent of the bank's net worth.