Overall, these banks' exposures especially to Lehman Brothers, which has filed for bankruptcy, is not significant and banks are reported to have made adequate provisions, the RBI Deputy Governor pointed out.

Out of 77 reporting banks, 14 reported exposures to Lehman Brothers and related entities in India or abroad, he said.

Consequent upon filing of bankruptcy under Chapter 11 by Lehman Brothers, all banks were asked to report the details of their exposures to Lehman Brothers and related entities both in India and abroad, the RBI Deputy Governor said.

"In the aftermath of the turmoil caused by bankruptcy, the Reserve Bank has announced a series of measures to facilitate orderly operation of financial markets and to ensure financial stability, which predominantly includes extension of additional liquidity support to banks," Rakesh Mohan said.

According to a RBI study undertaken in September 2007, there was no evidence of any direct impact on account of direct exposure to the sub-prime markets. However, a few of these banks did suffer some losses on account of the mark-to-market losses. These were caused by widening of the credit spreads arising from the sub-prime episode on term liquidity in the market, even though the overnight markets remained stable, he said.

Earlier, a Finance Ministry official had said the Indian banking sector saw a MTM loss of about Rs 410 crore due to their investment in instruments of troubled US financial giants such as Lehman Brothers and AIG.

ICICI Bank has accounted for three-fourths of the losses. Some state-owned banks had exposure in the instruments of these troubled US financial institutions, the official had said.

Shares of ICICI Bank on Friday settled 19.71 per cent down at Rs 364.10, after a partial recovery from an intra-day fall of close to 28 per cent to its three-year low of Rs 326.70.

In comparison, HDFC Bank shares fell by 5.65 per cent to close at Rs 1046.25, after recovering from its intra-day low of Rs 975.55.

Until a few weeks ago, ICICI Bank used to be the most valued bank in the country across both private and public sector entities. However, last month it lost this position to public sector giant SBI (BSE:500112), which now carries a market value more than double that of ICICI Bank.

In the overall banking sector, ICICI Bank now ranks as the third most valued after SBI and HDFC Bank. Across the market, ICICI Bank today moved out of the top-20 club to 21st position, as against a place among the top-10 till a few weeks ago.

Today's fall in ICICI Bank shares is the second major plunge within a fortnight after a 14 per cent dip on September 29.

(PTI)

The revised CRR cut means added liquidity of about $13.5 billion, or 600 billion rupees, in the money market, three times more than it should have been had the RBI cut the CRR by 0.5 percent.

At 11.00 a.m. the Bombay Stock Exchange's benchmark Sensex was down 573.26 points, or 5.06 percent, at 10,755.10 and the National Stock Exchange's S&P CNX Nifty was down 4.16 percent at 3,367.60 points. The Sensex recouped almost half its losses from the day's low of 10,239.76 points.

All 30 Sensex constituent stocks declined except the biggest lender State Bank of India, which was up 0.67 percent at 1,331 rupees.

India's number one private lender ICICI Bank Ltd. led declines, falling 12.92 percent to 394.90 rupees and India's biggest listed private company Reliance Industries Ltd. fell 6.04 percent to 1,549.90 rupees.

Software company Infosys Technologies Ltd., which posted a 30 percent rise in its second-quarter net profit, tumbled 5.66 percent to 1,183.35 rupees, but came off its day's low of 1,040 rupees.

Top engineering company Larsen & Toubro Ltd. slipped 5.06 percent to 917.70 rupees and India's biggest property developer DLF Ltd. fell 3.64 percent to 297.55 rupees.

All 13 BSE sector indices declined, led by the consumer durables index, which slid 7.52 percent.

On the broader market 269 advances trailed 1,790 declines.

Among the 50 shares that make up the Nifty, 46 declined led also by ICICI Bank. Punjab National Bank, a majority state-owned lender, topped gainers, rising 1.9 percent to 499 rupees.

tfn.newsdesk@thomsonreuters.com aka/alo

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The official was commenting after ICICI Bank's stock fell as much as 28 percent on Friday as panic-stricken investors sold shares in a weak Mumbai market.

(Reporting by Manoj Kumar; Editing by Ranjit Gangadharan) Keywords: INDIA ECONOMY/ BANKS tf.TFN-Europe_newsdesk@thomsonreuters.com jlw

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Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

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