Subprime exposure of banks negligible: Reddy

Y V Reddy, Governor, Reserve Bank of India, today said Indian banks with overseas presence have insignificant exposure to subprime mortgage in the US - indicating negligible impact of the crisis on the books of banking entities.

The pre-emptive monetary policy actions and prudential steps, which are already in place, will ensure that problems akin to the subprime crisis will not hit the financial system in India, he added.

"Our banks with overseas presence have confirmed that they have insignificant exposure to the US subprime mortgage market," Reddy said while addressing the Bankers Conference (BANCON) 2007 here today.

Large public sector and private banks, including State Bank of India and ICICI Bank, with overseas presence have negligible exposure to financial products like collateralised debt obligation (CDO) based on subprime loans in North America.

Reddy said the central bank, since 2005,  had flagged concerns over global imbalances, under-pricing of risks, excess volatilities and dispersion of risks to unidentifiable sources. The "extraordinary vigilance" of environment is warranted due to simultaneous volatilities in several globally significant markets like money, credit and currency markets, and commodity prices, especially oil and food items.