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Finance Minister P Chidambaram said public sector banks have virtually no exposure to Lehman Brothers. "There is no cause for alarm that any Indian bank is vulnerable."
According to him, the credit crunch globally will impact credit availability in the Indian market.
He maintains that FY09 economic growth will remain close to 8%.
Here is a verbatim transcript of Finance Minister P Chidambaram speech. Also see the accompanying video.
On the global situation:
Our banking system is reasonably insulated from what is happening in the rest of the world. However, if there is a credit crunch in the rest of the world, it will to some extent impact credit available in the Indian market. The Reserve Bank of
On exposure of Indian banks to Lehman:
Let me assure everyone there is no cause for any alarm that any Indian bank is exposed or is vulnerable like couple of banks that have failed in the
Impact on Indian economy:
I don’t know. There could be some tightness in credit. But if there is some tightness in credit, we will take some other steps to provide liquidity to the market.
On growth:
No, I don’t see any impact on growth. I still maintain my view that growth in 2008-09 will be close to 8%.
On reforms to provide credit to productive sectors of the economy:
I have heard a number of people make out a case. Only when the case is decided, will we know what the decision is. But I can’t tell you the decision today.
How will inflation pan out?
Don’t count the chickens before they are hatched.
On AIG:
AIG has two joint ventures in
On steps to prop up the rupee:
We don’t take a view on the exchange rate. Our position being that the exchange rate is likely to move both ways as long as the movement is orderly. Once upon a time, the exchange rate was touching 39 and some of you raised questions. Today, the exchange rate is moving in the other direction. We are concerned with the orderly movement of the exchange rate and RBI will take appropriate steps.
On solvency margins:
That question must be put to IRDA. Solvency margins are prescribed by the regulator not by the government.
On financial reforms:
Our financial reforms are carefully calibrated. We do not take decisions without carefully considering the pros and cons of the reform measure. We will continue to pursue financial sector reforms, but as I said having regard to the context, having regard to the international situation, and having regard to our ability to keep regulations one step ahead of innovation. As long as regulations remain a step ahead of innovation, there is no reason to fear that financial sector reforms will cause us difficulties or problems.
On the
These are questions you can put to the Department of Heavy Industry, as they are the ministry concerned. All that we have done today is to provide money to pay wages and other statutory liabilities. There is a timeline for them to find a solution to the Hindustan Photo Films problem. So, the question should be put to the Minister of Heavy Industry.
On the derivative side:
As far as the public sector banks are concerned in which the government is the majority owner, there is no undue exposure. In fact, many of them have no exposure at all. Whatever exposure they have, are in accordance with RBI’s prudential guidelines. Whether the guidelines for exposure to derivatives must be tightened is again a matter for the regulator, which is RBI, and not for the government. I should not be answering for regulators.
All I can assure you as a Finance Minister is all our financial institutions are on a sound foundation. Both IRDA and RBI have assured me that there is no reason for any apprehension.
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Today's Special Column
with Ashok Gulati
International Food Policy Research Institute , Director in Asia
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