The Global Financial and Economic Crisis of 2008-2009
Introduction
The turmoil in the international financial markets of advanced economies, that started around mid-2007,as a result of sub-prime crisis in USA, led to the collapse of major financial institutions like Lehman brothers or Washington mutual of USA and is now beginning to impact the real economy in the advanced economies.
In order to tackle the global credit crisis, various governments across the globe announced financial packages which included US package of $ 700 billion, Britain $ 632 billion,Germany $ 634 billion,France $ 456 billion,Netherlands $ 253 billion and Austria $ 126 billion. The size of these was more than double the size of Indian economy.
Impact of the crisis on India
India being a globalised economy, was bound to be affected by the crisis. Indian stock market was in turmoil with BSE Sensex touching a low of around 8000 points. There was a reduction in the capital account receipts in 2008-09 with total net capital flows falling from US $ 17.3 billion in april-june 2007 to US $13.2 billion in april-june 2008. Portfolio investments by foreign institutional investors (FIIs) witnessed a net outflow of about US $6.4 billion in april-sep 2008 as compared with a net inflow of US $15.5 biilion in the corresponding period last year. India’s GDP growth rate is likely to be adversely affected with RBI already having estimated it at a lower level of 7.7% in its mid –term review during october 2008.
Impact on The Indian Banking System
Introduction
The turmoil in the international financial markets of advanced economies, that started around mid-2007,as a result of sub-prime crisis in USA, led to the collapse of major financial institutions like Lehman brothers or Washington mutual of USA and is now beginning to impact the real economy in the advanced economies.
In order to tackle the global credit crisis, various governments across the globe announced financial packages which included US package of $ 700 billion, Britain $ 632 billion,Germany $ 634 billion,France $ 456 billion,Netherlands $ 253 billion and Austria $ 126 billion. The size of these was more than double the size of Indian economy.
Impact of the crisis on India
India being a globalised economy, was bound to be affected by the crisis. Indian stock market was in turmoil with BSE Sensex touching a low of around 8000 points. There was a reduction in the capital account receipts in 2008-09 with total net capital flows falling from US $ 17.3 billion in april-june 2007 to US $13.2 billion in april-june 2008. Portfolio investments by foreign institutional investors (FIIs) witnessed a net outflow of about US $6.4 billion in april-sep 2008 as compared with a net inflow of US $15.5 biilion in the corresponding period last year. India’s GDP growth rate is likely to be adversely affected with RBI already having estimated it at a lower level of 7.7% in its mid –term review during october 2008.
Impact on The Indian Banking System
RBI’s study (of sep 2007) on the impact of the sub-prime crisis on the Indian banks had revealed that none of the Indian banks had any direct exposure to the sub-prime markets in the USA. But, some of Indian banks had invested in the collateralized debt obligations/ bonds which had a few underlying entities with sub-prime exposures few of these banks did suffer some losses due to mark-to-market losses.
Consequent upon fall of Lehman brothers, the banks reported to RBI that majority of the exposures pertained to subsidiaries of Lehman bros holdings Inc. which was not covered by the bankruptcy proceedings.
RBI/ Government action
In the aftermath of the turmoil caused by these developments, the Reserve bank and Govt. have announced a series of measures (as under) to facilitate orderly operation of financial markets and to ensure financial stability which predominantly includes extension of additional liquidity support to banks.
POSTED BY : NETALI SAINI
Consequent upon fall of Lehman brothers, the banks reported to RBI that majority of the exposures pertained to subsidiaries of Lehman bros holdings Inc. which was not covered by the bankruptcy proceedings.
RBI/ Government action
In the aftermath of the turmoil caused by these developments, the Reserve bank and Govt. have announced a series of measures (as under) to facilitate orderly operation of financial markets and to ensure financial stability which predominantly includes extension of additional liquidity support to banks.
POSTED BY : NETALI SAINI
Netali - a good try but title not as per guidelines and no referencing. Structure not as per guidelines....
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