The Hindu Business Line : Bank derivative exposure to SMEs low

The Lok Sabha was informed on Friday that very few banks had derivative exposure to small and medium enterprises (SMEs). Also, most SMEs had not been allowed exotic products by the banks based on their customer appropriateness policies. As on end-December 2008, the total marked-to-market (MTM) derivative exposure of the banks to SMEs was only Rs 196 crore, which accounts for less than one per cent of their total MTM exposure in derivatives, the Finance Minister, Mr Prana b Mukherjee, said in a written reply. He was responding to a question on whether the Government was aware that speculative wagering contracts involving crores of rupees were aggressively marketed by some banks to unsuspecting SMEs. The Finance Minister said the Reserve Bank of India had collected data from 22 banks on their derivatives portfolio, their exposure to SMEs and the disputes, if any, with regard to their contracts in derivative segment. There were very few disputes with SME customers on account of derivative transactions. On receiving information regarding widespread losses on account of derivative transactions by users, the RBI had carried out special scrutiny of a few banks and specifically focused on the derivatives portfolio during its annual financial inspections of the banks.

— Our Bureau

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