The Hindu : Business : Sub-prime crisis not to hit banks

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Thursday, Aug 23, 2007
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Sub-prime crisis not to hit banks

Special Correspondent

RBI, NHB have taken pre-emptive measures

NEW DELHI: The Indian banking system is likely to remain insulated from the sub-prime mortgage lending crisis in the U.S., according to HDFC Chairman Deepak Parekh. However, problems for banks may stem from rising domestic property prices.

Speaking to newspersons here on Wednesday, Mr. Parekh said the U.S. sub-prime market crisis, brought about mainly owing to banks extending loans to people with poor credit history, was unlikely to exert any pressure on the country’s banking system.

Mr. Parekh pointed out that the Reserve Bank of India (RBI) and the National Housing Bank (NHB) had already taken pre-emptive measures to insulate the banking system from the effects of such a mortgage housing loan crisis.

Even though the rate of inflation was inching lower, Mr. Parekh noted that lending rates were not likely to move southward within the next six months.

This, he said, was despite the fact that in its quarterly monetary policy review last month, the Reserve Bank of India had sought to check the rate hike spree in the wake of low inflation.

For the week ended August 4, the rate of inflation was lower at 4.05 per cent.

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