Click to play videoNew Delhi: Global financial power houses are falling apart. Lehman Brothers is bankrupt, Merrill Lynch has been sold, AIG is nationalised and Morgan Stanley could end up being a Chinese entity.
There are concerns in the Indian market about the 'Lehman effect'. Investors fear that it could cascade to India's financial sector which is already reeling under high interest rates and spiralling inflation.
Reports of central banks around the world pumping billions of dollars into money markets has calmed the turmoil caused by the tumble in US Banking sector.
Finance Minister P Chimdambaram tried to soothe the frayed nerves of investor. He steadied the markets by saying the Indian financial sector is insulated from the current turmoil.
"Let me assure everyone that there is no cause for any alarm that Indian banks are exposed or vulnerable like the couple of banks that have failed in the United States," said Chidambaram.
But Indian banks have taken a hit due to the credit crisis, particularly the collapse of Lehman Brothers .
State bank of India is reported to have taken a US $ 5 million hit .
ICICI Bank, the largest private bank in the country, has an exposure of US $ 80 million.
ICICI says, the amount is insignificant and it does not warrant a rethink of its international strategy.
Joint MD & CFO of ICICI Bank, Chanda Kochhar said, "There is no need to rethink in the wake of whatever is happening globally. We will continue to move the way the Indian corporate sector is moving because that has been the main stay of our international strategy."
It is not just banks. India's US $ 64 billion IT sector could also be under threat. The financial services sector accounts for one third of their revenues.
The Morgan Stanley account is with Wipro and TCS while Merrill Lynch is handled by TCS and Infosys.
Tech firms say so far there is no impact but analysts agree that India is best placed to weather the financial collapse in the US .
The reasons lie not just in the resilience of India's economy but the regulators of the country's economy too can take the credit.
They have built a financial network which has shown itself to be much more solid than its fragile counterparts in the west.
(With inputs from Mike Sangma)
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