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Lehman fallout: Indian bankers see limited impact

Source: PTI
September 16, 2008 19:52 IST
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Indian bankers are not anticipating any tidal disruption on their balance sheets following the 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.

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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 euro 57 million (about Rs 375 crore) exposure in the Lehman Brothers debt.

"Considering a 50 per cent recovery estimate, the additional provision required would be about $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 $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 $50 billion, while world's largest insurer American International Group is also facing financial crisis.

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