Indian bankers are not anticipating any tidal disruption on their balance sheets following collapse of Lehman Brothers, though the ripple effect would touch the foreign inflows.
NEW DELHI: Indian bankers are not anticipating any tidal disruption on their balance sheets following collapse of Lehman Brothers, one of the giants of investment banking, though the ripple effect would undoubtedly touch the foreign inflows.
"There is concern with some of the banks who have derivative exposure through these troubled institutions including Lehman Brothers," said Punjab National Bank Executive Director K Raghuraman.
These derivatives deal will have to be settled pre-maturely if the Lehman Brothers goes in for bankruptcy protection, he said.
To that extent banks would be affected and liquidity would be squeezed, he added.
However, Raghuraman said that the fear factor may have bearing on the investment inflows in the short term.
According to ICICI Bank Joint Managing Director Chanda Kochhar, the London subsidiary of the bank has 57 million Euro (about Rs 375 crore) exposure in the Lehman Brothers debt.
"Considering a 50 per cent recovery estimate, the additional provision required would be about USD 28 million," she said.
The total exposure of the ICICI Bank is less than one per cent of its total assets which is over Rs 4.8 lakh crore.
The 158 years old financial institution has filed for bankruptcy protection, after loosing around USD 60 billion (About Rs 2,76,000 crore) in sinking real-estate market.
Another investment bank Merrill Lynch is being bought over by Bank of America for USD 50 billion, while world's largest insurer American International Group(AIG) is also facing financial crisis.
Meanwhile, Lehman Brothers three Asian subsidiaries - Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Futures Asia Limited have suspended their operations on Tuesday with immediate effect, including ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice.
HDFC Bank Treasury Head Sudhir Joshi said Indian Banking sector remains largely immune from the turmoil that erupted following sub-prime crisis in the USA.
The impact would be on the big banks which has exposure in Lehman Brothers directly or indirectly, he said.
IT service providers may be affected by the meltdown as the billing rate would come down, he noted.
Agreeing to the view Oriental Bank of Commerce Executive Director H Rantakara Hedge said, "I don't think that there will be an impact on the banking sector."
The fear factor has been driving the stocks of the banks down. It is not because of change in the fundamentals, he added.
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