Rs 500 cr bank exposure to S-E Asia

MUMBAI, FEB 21: The exposure of Indian banks to assets of crisis-ridden South-east Asian countries is less than Rs 500 crore and their total...

MUMBAI, FEB 21: The exposure of Indian banks to assets of crisis-ridden South-east Asian countries is less than Rs 500 crore and their total foreign liability is less than 10 per cent of their liabilities.

In India lending by banks to property was frowned upon and was generally restricted to housing finance. Similarly, lending to stocks is limited by a five per cent celling. This was stated by Y V Reddy, deputy governor, Reserve Bank of India, at a seminar on Emerging concerns and the state of Indian economy’ here on Friday. Overseas investment by banks has also been permitted only upto 15 per cent of their net unimpaired capital. According to Reddy, in the present jucture, the corporate sector of India as whole is not over-exposed to external liabilities. Referring to external sector concerns, Reddy said the forward liabilites of the RBI rarely exceeded 10 per cent of the reserves.

"We have been very cautious by generally limiting such aggregate outstanding liabilities. Of course, there is no rigidrule. We observe great prudence in these matters while exercising flexibility," he said.

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India’s short term external debt is about 27 per cent of the forex reserves and seven per cent of the total debt. The foreign currency reserves as on February 6, 1998 are higher at $ 24.4 billion compared with $ 22.4 billion in the beginning of the fiscal.

Reddy said the volume of external debt had been on the decline and during 1993-97, the total debt was reduced by one billion dollars while there was accretion to reserves of the order of $ 16.6 billion.. Referring to the flow of foreign direct investments, he said it was $ 2.5 billion during April-December 1997 against $ 2.7 billions during the whole of 1996-97. An important aspect, he said was that most FDI flow was to infrastrucutre and productive sectors.

FII investments so far has been less compared with the $ 1.9 billion for 1996-97. It is expected that it would be at least $ 1 billion during the year, he added.The flows on account of external andcommercial borrowings and non-resident deposits are positive on net basis and broadly as per expectations at the beginning of the year.