The government on Monday said Standard &Poor's revision of the outlook for the Indian banking system to 'stable' from 'negative' endorsed what India always believed.

Briefing mediapersons, Chief Economic Advisor Ashok Lahiri said, "The Indian banking system had shown its resilience even during the 1997 Asian financial crisis." He said that the Reserve Bank of India gave a licence to the first asset reconstruction company floated by ICICI Bank, IDBI and HDFC among others.

According to Lahiri, all other macro-economic indicators reflected a buoyant economy. The current rainfall was 3 per cent above normal up to August 25 and the Bombay Stock Exchange Sensitive Index (Sensex) closed at a 30-month high of 4,324.76, 1.9 per cent higher than Friday.

The net inflows from foreign institutional investors (FIIs) had crossed the $ 8-billion mark in the first eight months of the current calendar year, he said. "Such FII inflows were witnessed last in 1996," Lahiri pointed out.

UK Sinha, joint secretary, capital markets and external commercial borrowings, said the finance ministry was expecting a team from S&P to visit India later this month. "We have invited them to meet government officials and regulators and engage them over a dialogue on various issues," he said.

When asked if the huge investment by public sector banks in government securities was a matter of concern, Sinha said, "During the last few years, banks have invested much more in G-secs than the stipulated 25 per cent to meet SLR norms. However, we have now allowed interest rate derivatives for hedging which will take care of the downward risk."

"Heavy investment in g-secs essentially means that enough money is not available for the private sector." With a secondary market rally as being witnessed now, he said, the debt-equity ratio should go down. Further, investments were expected to pick up if there was a revival in the primary markets, he said. "Banks will find better investment avenues then," he added.