Global Crisis: Impact on Indian Bank
• Indian Banks have invested in derivatives, which might have exposure to these investment bankers
• PSU banks like Bank of India, Bank of Baroda have exposure towards derivatives
• ICICI Bank is expected to lose approximately $80 million invested in Lehman's bonds
• Commercial banks may have exposure to derivative depend on third party commitments
• Finance minister reiterated PSU Indian banks has no exposure to Lehman
• FM says tightening in credit supply due recent financial turmoil
• Indian banks are properly captalized and well regulated in comparison to US banks
• FM further guaranteed that extra steps would be taken to infuse liquidity
• Lehman Brothers and ML had invested substantially in the stocks of Indian banks
Indian Banking: Govt Response
• FM says more stringent laws to ensure further strengthening of the banking industry
• RBI reexamining norm governing derivative exposure of banks
• Indian Banks
Total Overseas Investment
2007 March 31, 2008 March 31,
• SBI Rs 6254 cr Rs 6672 cr
• Bank of India Rs 4462 Rs 4524 cr
• BoI Rs 4280 Rs 4397 cr
(Source: Annual Reports, figure include investment in subsidiaries & associates)
Indian Financial: Again in Limelight
• Indian banks have nearly 30% of balance sheet in government bonds
• Bonds is only asset class benefited form sharp G-sec rally over last two months
• Inflation expectation have tempered & global cridit crisis has given much need trigger for monetary easing
• Falling inflation is paving the way for softer interest rates
• Global financial markets cast shadow of gloom cast over Indian banks
• Since January 2008 Bankex has underperformed the Sensex by 12%
• Volatility in Bankex also...