The Hindu Business Line : Credit derivatives: Banks asked to detail exposure

Mumbai, March 5 While the actual losses of Indian banks on account of sub-prime impact are yet to be ascertained, the Reserve Bank of India is understood to have sought more details on their overseas transaction and investments.

A senior official of a large public sector bank said that the bank had received a communication from the regulator, ten days ago, seeking details of its exposure to overseas credit derivatives.

He said other banks, with overseas operations, had also been asked to provide such details. While for most banks, this exposure is insignificant compared to their consolidated balance sheet size, their current market value of these investments is lower than the price at which they were bought.

ICICI Bank, on Tuesday, declared that it has suffered marked to market losses of $264.3 million (about Rs 1,056 crore) on account of exposure to overseas credit derivatives and investments in fixed income assets, as on January 31, 2008.

On Wednesday there were news reports that public sector banks like State Bank of India, Bank of Baroda and Bank of India too have been hit by their exposure.

Insignificant, says SBI

According to news agency reports, SBI has an exposure of $ 1billion. A senior official from the bank declined to comment on the figure, but said the bank had provided the information asked by the RBI. “The exposure is very nominal and insignificant,” he said.

According to banking sources, the banks may face a problem if their individual overseas units suffer losses, due to the fall in the value of the investments. This may force the banks to provide for additional capital, said a banking analyst.