'No danger of bank collapse in India'

Kochi, Nov 11: Though there is no danger of any bank collapsing in India like the US, some damage could be caused to banks exposed to the capital market and those which have lent to the vulnerable sectors of the economy, Syndicate Bank CMD George Joseph said here.

Addressing a press conference, Mr Joseph said the Indian banks were well regulated and relatively insulated from the global financial turmoil. Thus, there was no threat of any bank collapsing in India. However, being part of a global village, India could not be completely insulated from the overseas developments and some sectors of the economy would bear the brunt.

The capital market would continue to be volatile with the foreign institutional investors (FIIs) withdrawing from it. Similarly, the forex market would also be volatile with the Rupee already depreciating by almost 20 per cent against the US Dollar, he said.

This would spell bad news for imports, especially crude, edible oil and consumer and capital goods.

While a depreciating Rupee was good for exporters, they could face the problem of delayed payments and a fall in demand in the overseas markets, especially the US, Mr Joseph said.

''However, India is better placed than China as the US accounts for almost 50 per cent of the latter's exports. India also has a strong domestic market,'' he added.

The software sector would also be affected to a certain extent, he said.

Asked about the impact of the financial meltdown on the Indian banks, he said the banks which were heavily exposed to the capital market would face losses.

Similarly, banks, including Syndicate, would have to prepare for some weakness in the borrower portfolio and take quick decisions to avoid slippages in repayment, he added.

While the recent months had seen an upsurge in NRI remittances to Indian banks, a deeper and longer recession would definitely slow down the flow of NRI money into the country.

Lauding the Central Government and the RBI for taking proactive steps to tackle the economic slowdown, Mr Joseph expressed confidence that India would be able to contain the situation to a certain extent.

UNI