Impact of eurozone crisis on banks may be limited: Govt

The Reserve Bank has informed the government that the impact of eurozone crisis on the Indian banks may be limited.

Updated: Aug 30, 2012, 17:52 PM IST

New Delhi: The Reserve Bank has informed the government that the impact of eurozone crisis on the Indian banks may be limited.

As per the Financial Stability Report (FSR) of RBI, the first order impact of the eurozone crisis may be limited as there is no presence of Indian banks in Portugal, Italy, Greece and Spain (PIGS), Minister of State for Finance Namo Narain Meena has said in a written reply to the Lok Sabha.

"Secondly, none of the Indian banks has any exposure to bonds issued by Portugal, Greece and Spain, while exposure to Italian bonds is negligible," he said.

He also said that the funding dependence of overseas branches of Indian banks on European entities, except for the UK, is also not very significant.

Replying to another question, Meena said that RBI has stated that there had been no report of serious crisis in the form of run on Dhanlakshmi Bank.

However, the Annual Financial Inspection (AFI) on the bank carried out by the RBI for the financial year 2010-11 and 2011-12 brought out certain irregularities in the accounting practices adopted by the bank, he said.

These included non-adherence to RBI guidelines on income recognition, asset classification, provisioning norms and disclosure requirement, he added.

RBI has advised the bank to take corrective steps in the matter and is closely monitoring the day-to-day operations of the bank, he added.

In response to another question, Meena said, with a view to achieve greater financial inclusion, RBI has advised banks on August 10, 2012 to offer basic 'Savings Bank Deposit Account'.

Such accounts would come with some more enhanced facilities, including facility of ATM card or ATM-cum-Debit Card.

"This account shall not have the requirement of any minimum balance," he said.

The facilities will be provided without any charges, he said, adding, the existing basic banking no-frills accounts are also to be converted to Basic Savings Bank Deposit Account.

On Credit Guarantee Fund (CGF) for education loans, Meena said, the government is yet to finalise the framework for the fund.

The government had announced setting up of CGF for education loans to ensure better flow of credit to deserving students in Budget 2012-13.