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How will crisis at Credit Suisse affect Indian economy?

Credit Suisse owns assets worth more than Rs 20,700 crore in India


The crisis-laden Credit Suisse Group AG has a major presence in India’s derivatives market and hence its fate is more relevant to the country than that of the fall of Silicon Valley Bank, but not enough to cause concern.

Credit Suisse owns assets worth more than Rs 20,700 crore in India and is the 12th largest foreign bank in the country. This, however, amounts to 0.1 per cent of assets in the country's banking system and hence, the crisis at the Swiss lender would not have a large impact.

The presence of foreign banks in India is considerably small with just 6 per cent share in total assets—with Credit Suisse accounting to a mere 1.5 per cent of that share—4 per cent in loans, and 5 per cent in deposits. They have more exposure in derivative markets, with 50 per cent share.

Credit Suisse has only one branch in India (Mumbai).

"Given the relevance of Credit Suisse to India's banking sector, we see softer adjustments in assessment of counter-party risks, especially in the derivative market," said equity analysts at Jefferies.

Jefferies analysts Prakhar Sharma and Vinayak Agarwal said, "We expect RBI to keep a close watch on liquidity issues, and counterparty exposures and intervene as necessary. This may also lead to institutional deposits moving more towards larger/ quality banks."

“We watch out for liquidity issues and any rub-off on counter-party risk assessment (esp. in derivatives) and deposit market may move towards larger/ quality banks," the analysts said.

Meanwhile, Credit Suisse said it will borrow up to $54 billion from the Swiss central bank to shore up liquidity. The announcement saw its shares going up by more than 30 per cent on Thursday, after a massive downward swing a day earlier.

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