The Indian private banking sector has incurred Rs 400 crore mark-to-market (MTM) losses due to their exposures to Lehman Brothers and AIG. Out of this amount 75% accounts to ICICI bank alone.
MTM is based on the market value of underlying securities and it keeps varying. It is a notional loss but it gets reflected in the balance sheet.
According to the official, investments in instruments of financial giants like investment bank Lehman Brothers and insurer AIG has led to ICICI Bank losing Rs.309 crore. "MTM losses by the banking sector, including private banks, stood at Rs.410 crore, owing to financial crisis in some institutions," said a senior Finance Ministry official.
In addition, some state-owned banks also had exposure to instruments of these troubled US financial institutions. This exposure is estimated to be around Rs 234 crore.
"Exposure of a few public sector banks to credit-linked and floating rate notes of Lehman Brothers and other troubled institutions is about USD 52 million," official said.
India's Finance Minister P. Chidambaram earlier this month assured that Indian banks were well insulated from the financial crisis that has shaken Wall Street.
As far as PSU banks are concerned, he had said they didn't have any ‘undue exposure'.
"In fact, many of them have no exposure at all. Whatever exposure they have are in accordance with RBI's prudential guidelines," he said, adding, ICICI Bank had some exposure, which it has disclosed.
However, he sounded some caution saying that though the country`s banking sector was well protected from global crisis, the credit crunch could have some effect in India as well. He said, "If there is a credit crunch in the rest of the world, it will, to some extent, impact the credit availability in Indian market. RBI, day before yesterday, took steps to provide liquidity to the banks.
The London subsidiary of ICICI Bank had $80-million exposure to senior bonds of Lehman Brothers.
According to ICICI Bank joint managing director Chanda Kochhar, the bank's exposure to foreign markets equal to about 4 percent of its total balance sheet, and it had the capability to handle market movements. Kochhar said the investment made by its London subsidiary in Lehman Brothers constituted less than 1 percent of its total assets and less than 0.1 percent of the consolidated total assets of the ICICI group.
ICICI Bank has consolidated assets worth $103 billion.
There were some concerns in India about the fate of Tata-AIG alliance in life insurance and non-life insurance ventures. AIG has appealed to the US Federal Reserve for a lifeline to help prevent it from going Lehman's way.
However, the finance minister had brushed aside the concerns, saying the Tata-AIG ventures are "in a sound financial basis."
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