The Reserve Bank of India (RBI) on Sunday assured depositors that there is "no concern regarding the safety of their deposits in any bank".
"Concern has been raised in certain sections of media about the 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 Ratio (CRAR) and not on market capitalization," RBI tweeted.
"RBI closely monitors all the banks and hereby assures all depositors that there is no such concern of the safety of their deposits in any bank," it added.
Earlier today, Chief Economic Advisor KV Subramanian also said that the m-cap ratio is an incorrect way to measure the safety and solvency of a bank. He further added that Capital to Risk (Weighted) Assets Ratio (CRAR) is the standard measure for the safety of a bank. Pointing out figures, the CEA said that Indian banks have 80 per cent more capital than the globally mandated norm for CRAR.
"The m-cap ratio is a totally incorrect measure to assess the safety or solvency of a bank. Instead, what experts and regulators worldwide use is CRAR. The global norm for CRAR is 8 percent. Compared to that, our banks have on average 14.3 per cent CRAR," he said.
"This means that our banks have 80 per cent more capital than the globally mandated norm. Even if we take the RBI norm which is 9 per cent, our banks have 60 per cent more capital. So, the margin of safety for our banks is huge," he added.
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