Reserve Bank Governor D Subbarao on Friday sought to ally fears on the state of domestic banking sector by saying that inherent strength of banks lies in the regulatory mandate of 25 per cent statutory liquidity ratio and 6.5 per cent cash reserve ratio.
He also highlighted the overall high capital adequacy ratio of Indian banks which stands at 12.7 per cent, well above the regulatory minimum of nine per cent, and the Basel-accorded requirement of eight per cent.
"The most prominent symptom of the problem in the financial sectors of advanced countries has been the freezing up of inter-bank markets," the RBI governor told reporters after the credit policy review announcement in Mumbai.
"On the contrary, the inter-bank market in India has been functioning in an orderly manner," he added.
Indian banks have no direct exposure to the US sub-prime assets and the mark-to-market losses suffered by their foreign subsidiaries and branches have been 'modest', he said.
These losses on financial instruments were due to general widening of credit spreads, he said, adding adequate provisioning had been made for the same.