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Euro zone debt crisis to have limited impact on India's economy, banking sector: SBI managing director Kumar

New Delhi: The Indian economy and its banking sector will not be affected substantially by the escalating sovereign debt crisis in the Euro zone as the exposure of the Indian banks to the region is negligible, State Bank of India's (SBI) Managing Director A Krishna Kumar told the Gulf News, even as SBI's plans to raise funds from the international market may come under risk if the debt contagion spreads further from Greece.

"The impact of the full blown banking crisis on Indian banks will be limited mostly to cost and availability of liquidity in the international markets where Indian banks raise funds through medium term note (MTN) programs," Kumar said.

"At worst we will see the cost of funds going up, but liquidity will not be a big issue for Indian banks," he added.

SBI -- India's largest lender -- including many other banks in the country have lined up MTN programs, which allows flexible placement of bonds in various currencies and with varying maturities on the euro bond market.

Earlier September, the state-run lender increased the size of its MTN program from $5 billion to $10 billion, even as media reports said that Indian banks, including SBI, have delayed the fund raising program from overseas owing to volatility in global markets.

In August, SBI Chairman Pratip Chaudhuri sought to allay fears over the bank's exposure to the Euro zone area and had said that the bank's $353.6 million worth of exposure to banks and traders in the region is safe.

International organizations like the International Monetary Fund and Asian Development Bank recently cut India's gross domestic product (GDP) growth projection for the current fiscal year ending March 31, 2012, citing negative global cues and tight domestic monetary condition.