According to banking industry sources, the impact of sanctions is fast tapering off and normalcy is returning. Even Chase Manhattan Bank, the only US bank to follow President Bill Clinton's "sanctions" in letter and spirit, has softened its stand. It has said that there is no restriction on forex and trade transactions and correspondent banking with Indian banks.

Confirming the latest developments vis-a-vis Japanese banks, Bank of India general manager (international operations) PR Yagnik told The Financial Express: "We have a reciprocal line of credit of $12 million with Fuji Bank. In addition to this, Fuji has offered us a fresh line of $10 million."

This indicates a clear shift in the attitudes of Japanese banks against thebackdrop on economic sanctions. Last week Japanese banks had withdrawn lines of credit to Indian banks and subsequently restored them.

Unlike the US clearing banks -- which have withdrawn intra-day overdraft facilities to Indian banks following the economic sanctions -- the Japanese banks initially decided not to lend to Indian banks on their own even though their government had not called for such sanctions.

Bank of India sees no problems for the future as far as its banking operations abroad are concerned. "We do not have any liquidity problem. As in April, Bank of India's outstanding lines to Japanese banks all over the world were to the tune of $625 million," Yagnik said. In Japan, it has deployed close to $300 million to a host of banks, including Bank of Japan, Sakura Bank, and others.

"In the US also, we have deployed between $15 and $20 million. There is no problem on the liquidity front," the BoI official said.

Among Indian banks, both State Bank of India and Bank of India have two brancheseach in Japan. The Japanese banks, after initially withdrawing lines of credit, did not impose any ban on LCs and other financial instruments that are crucial for Indian exporters and importers from that country.

US banks have, on the other hand, cut off overdraft and line of credit facilities to Indian banks in the wake of the series of nuclear tests and the subsequent US sanctions. US law calls for the banning of "all credit, credit guarantees, or other financial assistance by any US bank, department, agency or instrumentality of the US government" to the Indian government and institutions owned by it.