RBI helps mitigate subprime

The private sector banking stocks have taken a beating post rumours of sub prime exposure of Indian banks. The issue came to the forefront in the parliament where it was announced that ICICI bank had suffered marked to market losses on credit derivatives.The stock has fallen 40-50% from its all time high and the negative outlook on banking stocks continues to persist among investors and analysts alike. However the situation cannot worsen from here on given the stringent norms RBI had in place for overseas portfolio investments by Indian corporates. RBI's regulatory forbearance in the banking and financial services sector through a cautioned liberalisation process and a calibrated removal of capital controls has really paid rich dividends for the Indian economy in the wake of the ongoing sub prime crisis globally. RBI's stringent norms on issuing fresh licences to open banking branches abroad and its norms on capital controls exercised through the FEMA act has insulated India from the subprime contagion. The mint street giant deserves all the praise from the Indian public at large for its persistence in what were until recently, in the wake of globalisation, termed "retrogade policies" by various economists. Their cat calls have collapsed along with various investment banks and hedge funds in the aftermath of the global credit crisis. Kudos to RBI for its appreciable act of monetary management.