India Says Its Banks Are Insulated From Credit Crisis (Update2)
By Bibhudatta Pradhan and Pratik Parija
Sept. 18 (Bloomberg) -- India's banks aren't vulnerable to the global credit crisis that's led to the collapse of two U.S. investment banks, Finance Minister Palaniappan Chidambaram told reporters in New Delhi today.
Indian lenders are well regulated and there's no cause for any alarm, Chidambaram said. The South Asian nation's central bank took steps to increase funds available to banks earlier this week as there may be some impact on credit because of the global squeeze, the minister said.
India will take more steps to make credit available if needed, Chidambaram said. The U.S. Federal Reserve, the European Central Bank and the Bank of Japan today joined with their counterparts around the world to pump dollars into the financial system on concern more banks will follow Lehman Brothers Holdings Inc. into bankruptcy.
State Bank of India, the nation's largest, climbed 2.3 percent in Mumbai trading as of 2:08 p.m., rebounding from a 6.9 percent decline earlier today. The lender led a revival in the Bombay Stock Exchange's Bankex index, which had shed 6.2 percent this week through yesterday as the global financial crisis deepened following Lehman's bankruptcy petition.
ICICI Bank Ltd., India's second largest, gained 2 percent. The stock had dropped 14 percent this week, through yesterday, after the bank said it may have to set aside an additional $28 million to cover losses on investments in Lehman securities in the U.K.
AIG's Bailout
American International Group Inc., which had to be rescued by the U.S. government this week, hasn't disrupted operations at its units in India, Chidambaram said. The company's two joint ventures with the Tata Group have assured India's insurance regulator that they have sufficient funds to meet all obligations, the minister said.
Tata Sons, which controls India's biggest makers of steel, autos and tea, owns 74 percent of the two AIG ventures in the South Asian nation, the U.S. insurer's Indian units said in a e- mailed statement today.
``In India, Tata AIG Life and Tata AIG General are well capitalized and subject to local stringent capital and regulatory requirements,'' according to the statement. ``Our local solvency margins are well over regulatory requirements.''
AIG's asset management operations in India are also ``well capitalized,'' the company said. Clients' assets are held in a separate trust as required by India's capital-markets regulator.
``Our investments, consumer finance and captive software development functions continue to operate in their normal course,'' AIG said today in India.
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