No cause of alarm due to U.S. financial crisis: Chidambaram

New Delhi, Sep 18 (PTI) Finance Minister P. Chidambaram
Thursday said there is no cause for alarm for the Indian
financial institutions and banks, which are largely insulated
from the crisis that has gripped the U.S. financial system.

"Let me assure every one there is no cause for any alarm
that any Indian bank is exposed or vulnerable like a couple of
banks that have failed in the United States," Chidambaram told
reporters after briefing on the decisions taken by the Cabinet
Committee on Economic Affairs.

In his first reaction after the collapse of Lehman
Brothers and the bailout of the largest U.S. insurer A.I.G.,
the Finance Minister said India's financial institutions were
on a sound foundation.

"Both I.R.D.A. and R.B.I. have assured me there is no
reason for any apprehension," he said.

As far as P.S.U. banks are concerned, in which the
government is a majority owner, Chidambaram said they didn't
have any "undue exposure".

"In fact, many of them have no exposure at all. Whatever
exposure they have are in accordance with R.B.I.'s prudential
guidelines," he said adding I.C.I.C.I. Bank had some exposure
which it has disclosed.

Asked if India needed to tighten its prudential norms in
the context of the U.S. crisis, he said: "Whether the
guidelines for exposures to derivatives must be tightened is
again a matter for the regulator, R.B.I. not for the
government. I should not be answering for regulator."

Stating that there was no apprehension on the financial
stability of Indian banks, Chidambaram said: "Our banks have
strong balance sheets and they are very well regulated. All of
them have made full discloses to R.B.I., which is on top of
the situation."

The Finance Minister said while the country's banking
system was reasonably insulated from the global crisis, the
credit crunch could have some effect in India as well.

"If there is a credit crunch in the rest of the world, it
will, to some extent, impact the credit availability in Indian
market. R.B.I., day before yesterday, took steps to provide
liquidity to the banks," he added.

The R.B.I. had announced measures to inject liquidity
into the banking system as credit concerns increased after the
collapse of Lehman Brothers. The central bank also stated it
would continue to sell dollars and support the rupee which had
touched a two-year low on concerns of capital outflows, mainly
by the F.I.I.s.

Chidambaram said there could be some tightness in credit
but "if there is some tightness in credit we will take other
steps to provide liquidity in the market".