The Reserve Bank cautioned that India could be hit hard if there were further defaults in the US housing loan market – a crisis which had caused domestic stock markets to crash earlier this month.
“Further deterioration in sub-prime delinquencies could lead to reassessment of risk by investors across products and markets and retrenchment of capital from emerging market economies (EMEs)… in particular, global financial market could turn volatile with attendant implications for EMEs like India,” apex bank said in its Annual Report 2006-07.