Germany’s Foreign Minister Frank-Walter Steinmeier is beginning a three-day trip to India on Wednesday. The main focus of his talks will be the global financial crisis and the future role of India and other emerging economies, according to his spokesman. Although affected by the crisis, India’s financial situation is still reasonably stable.
Brokers in Mumbai are nervous about the volatile markets
The reason no Indian bank is teetering on the brink of collapse can be attributed to India’s conservative regulation policies, insists Prime Minister Manmohan Singh.
But just to make sure India doesn’t succumb to the financial crisis, the government has introduced a variety of measures.
To boost the banking sector and economy as a whole, the central bank recently lowered the rate of interest.
Banks are now being called upon to keep fewer of their reserves in cash so that there is more liquidity on the markets. There are mixed feelings among investors and consumers.
Nervousness at Mumbai stock exchange
For private investors at the Indian stock exchange in Mumbai shortly before trade opens at 10, the atmosphere is tense. Since the beginning of the year, stocks have fallen by 50 percent and people are nervous.
“This is a totally volatile market,” says one trader. “Nobody can determine what the position will be tomorrow. The small investors are definitely ruined.”
Some customers began closing their bank accounts after rumours they would run out of money. But the central bank was quick to issue notices saying everything was fine, so as to reassure account holders.
Nothing to worry about?
V.K. Kamath, the CEO of India’s largest bank ICICI, insists there is nothing to worry about: “In India, frankly, there hasn’t been a challenge in terms of an increase in non-performing assets or in terms of quality of credit, or in terms of the exotic products in the West.”
“None of these have been present in India. So, I guess that the Indian banking system has been rather insulated from the happenings.”
Like Kamath, generally, actors in the Indian world of finance have expressed relief that banks are strongly regulated compared to those in the West.
India depends on international markets
But Anand Tandon, a trader with Bric Securities, warns that things are not so rosy and reminds people that India is very dependent on the international financial markets.
“In absolute terms, we are a much more stable market at the moment, and by and large the banking system is fairly sound. So I don’t see that we will have any immediate problems. That said, in the longer term, India is a capital deficit country, and we need capital to continue to grow.”
Overall, however, most people in Mumbai’s banking district are hoping that India will be able to weather the storm brewing all over the world.