The Indian banking sector saw mark-to-market (MTM) losses of around Rs 400 crore due to their investments in instruments of troubled US financial giants Lehman Brothers and AIG. About 75 per cent of these losses is accounted for by the ICICI Bank alone.
“MTM losses by the banking sector, including private banks, stood at Rs 410 crore, owing to financial crisis in some institutions. Of this, ICICI Bank alone has an MTM loss of Rs 309 crore,” a senior Finance Ministry official said.
| MONEY MUDDLE |
MTM is based on the market value of underlying securities and it keeps varying. It is a notional loss but it gets reflected in the balance sheet.
Some state-owned banks also had exposure to instruments of these troubled US financial institutions. This exposure is estimated to be around Rs 234 crore.
In his first reaction after the collapse of Lehman Brothers and the bailout of the largest US insurer, AIG, Finance Minister P Chidambaram had said India’s financial institutions were on a sound foundation.
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As far as PSU banks were concerned, he had said they didn’t have any “undue exposure”.
The Finance Minister had said that while the country’s banking system was reasonably insulated from the global crisis, the credit crunch could have some effect in the country.
The London subsidiary of ICICI Bank had $80-million exposure to senior bonds of Lehman Brothers.
ICICI Bank Joint MD Chanda Kochhar had said the investment by the subsidiary constituted less than 1 per cent of its total assets and less than 0.1 per cent of the consolidated total assets of the ICICI group.
On June 30, 2008, ICICI Bank and its subsidiaries had consolidated total assets of Rs 4,84,643 crore.