INDIAN BANKS DO NOT HAVE MUCH EXPOSURE TO DUBAI WORLD : RBI

DEC 5, 2009



The Reserve Bank today said the domestic banks do not 
have much exposure to the debt-ridden Dubai World and 
hence their balance sheets will not be materially 
affected from the crisis. In the larger context,
the rating agency Moody’s also today said the ratings
of Asian banks are not likely to be downgraded,
unless there is a massive restructuring in Dubai.

Reserve Bank Deputy Governor Usha Thorat said
that the crisis will not impact the country’s
banking sector as the exposure “is not significant
 and not a matter of concern. It is not something
that materially affects their balance sheets.”

Moody’s also said Asian banks have relatively
small exposure to Dubai and Dubai World companies.
 “Therefore, no rating actions have been taken on
 Asian banks as a result of the requested standstill
 on select Dubai World debt payments. 

Nor does Moody’s expects that there will be
any need of negative rating action on Asian
banks at a later date…”
So far as the domestic banks are concerned,
 Bank of Baroda has an exposure of Rs 5,000 crore
in Dubai. State Bank of India too had provided
 Rs 1,500 crore to some UAE companies.

Moody’s said, “the Asian banks have billions
of dollars of exposures to the UAE entities,
but this represents small per cent of their assets.
 To date, we have found no Asian banks to have
sufficiently high levels of exposure to members
 of Dubai World group to warrant any ratings actions.”

Thorat, however, admitted that the Dubai crisis can
have some impact on remittances and affect those parts
 of the country that receive inflows from the Gulf
nation in larger quantity.

“Some parts of the country are certainly more dependent
 on remittances from Dubai, but overall I think it is
too early to say. There could be some impact obviously,”
the RBI Deputy Governor said, when asked about the impact
 of the crisis on the country.

Many states, especially Kerala, receive large amount
 of remittances from persons working in the Gulf region.
As many as 42 per cent of the 1.5 million population of
 Dubai are Indians and the UAE contributes nearly 13 percent
of the overall remittances to the country. India was the
 highest recipient of remittance flow at $52 billion or
 15 per cent of the global total last year, according to
a World Bank report. This constitutes 3.3 per cent of the GDP.
“We have to see how far this (Dubai financial crisis) spreads”,
she said, adding that it may be too early to say anything about
the fallout of the crisis on the country at present.

The financial crisis in Dubai erupted late last month with
the conglomerate Dubai World asking for six months time to
repay its USD 59 billion debts.