Lehman Brothers affect on Indian Banks: declare 4 billion Losses

The news is out. India is not shielded from the Collpase of Lehman Brothers who declared Banruptcy. Initially, tehre were many rumors that Effect on ICICI Bank for Lehman Brothers Bankruptcy and many people in South India actually queued up to withdraw their money from their ICICI bank accounts at ATMs and ICICI Bank Branches.

However, not only the ICICI bank, but other Indian Banks have also been affected by the Lehman Brother Bankruptcy due to MTM losses or Mark to market losses. As per the reports, The Indian banking sector has incurred Rs 4 billion mark-to-market losses due to their investment in instruments of bankrupt Lehman Brothers and AIG, reports Economic Times.

The major portion of this has been taken by ICICI Bank alone accounted for Rs 3 billion of losses due to Lehman Brother bankruptcy.

MTM is based on the market value of underlying securities and keep varying. MTM is a notional loss but it would be reflected in the balance sheet. A few of state-owned government banks also had exposure in the instruments of these troubled US financial giants to the tune of Rs 2.34 billion.

Related: Effect on Lehman Brothers Bonds: Lehman Brothers Bankruptcy

Immediately after the collapse of Lehman Brothers and AIG, Finance Minister P Chidambaram had said that India's financial institutions were on a sound foundation and PSU banks were not having any undue exposure to the same.

However, he sounded some cautions saying that though the country`s banking sector was well protected from global crisis, the credit crunch could have some effect in India as well.