"Our banking system is stable and sound. There is no reason for any anxiety or uncertainty," he said while talking to reporters.

Pointing out that RBI has already taken action to inject liquidity into the system, Subbarao said, "We are monitoring the situation on a continuous basis and stand ready to take appropriate, effective and swift action."

As regards the Indian banking system, the Governor said the banks are sound, well capitalised and well regulated. "

Indian banks do not have any direct exposure to sub- prime mortgages. The banking sector, through its overseas branches, has some exposure to distressed financial instruments and troubled financial institutions.

"But this exposure is part of the normal course of their business and is quite small relative to the size of their overall business," said Subbarao, who is here to attend the Annual Meetings of the World Bank and the International Monetary Fund.

Defunct mortgage loans are the primary reason for the financial crisis sweeping the world.