Indian banks are largely cushioned from the recent depreciation of the rupee as they are domestically funded in local currency, Standard & Poor’s Ratings Services said today.
“Indian banks are also largely cushioned from the recent depreciation of the rupee. That’s primarily because they are domestically funded in local currency, and foreign currency assets and liabilities are mostly matched,” it said in a release today.
The report based on Asia—Pacific banks said they have adequate buffers to withstand currency depreciation, and lenders in the region appear fairly well—padded against the recent fall in currency value.
“Many banks in key Asia—Pacific markets are sufficiently insulated against the strain on their local currency typically because of their low foreign currency exposure and hedging policies,” said Standard & Poor’s credit analyst Geeta Chugh.
“The effect of currency volatility on banks’ corporate borrowers in most countries will have limited impact on the banking sector’s asset quality,” she said.
On China’s devaluation of the renminbi, the agency said the weakening of the currency could be neutral to positive for both the Chinese economy and the banking sector.
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