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Forex crunch in big banks

business Updated: Oct 31, 2008 21:00 IST
Mahua Venkatesh

State-run behemoths State Bank of India (SBI) and Bank of Baroda (BoB) and private sector giant ICICI Bank are among those having problems in meeting their business commitments in the international markets, despite an improvement in the liquidity situation, industry sources said.

A banking analyst pointed out that there is still a shortage of funds though the liquidity condition has eased significantly. The liquidity situation is sufficient to take care of the credit demand at present but lot more is required especially for banks with overseas presence and commitments, the analyst said.

However, when contacted, a senior official at BoB, said that there was no major cause for concern for the bank. “We are still in a comfortable position though there could be some hiccups at a later stage,” he said. ICICI offered no comment.

SBI officials in Delhi they had no immediate comment.

A government source said the Finance Ministry was aware of the situation and would provide all kinds of support to the banking industry to tide over the current period of crisis, with global banks in a turmoil.

A committee headed by finance secretary Arun Ramathan set up to study the liquidity status of the Indian banking system is of the view that a part of the foreign exchange reserve be used to address the issue. “A special line of credit will be made available to the banking industry. We will assess various options and then take a call,” a senior government official told HT.

ICICI Bank has presence in countries like the UK, Singapore, Hong Kong, Russia and Canada among other places. SBI and BoB too have considerable overseas businesse and branches.