The currency is being powered largely by the strong economies of Germany, France and Italy. The switch to the euro has "immediate and extensive" significance for our trade with Europe, a trade official told IANS. "But our banks are by and large still unprepared to handle all the implications of the new currency," he said.

Coins and notes in the euro will be issued only in 2002. But Indian banks have been instructed to prepare themselves to build positions in the euro, list exchange rates with the euro and be prepared for making payments, processing letters of credit and making settlements in the euro.

"We are still not quite ready for a new currencythat for the first time looks like rivalling the dollar," the official said. Recent weeks have seen considerable correspondence between trade officials and Indian banks in Britain and elsewhere in Europe on dealing in the euro.

"A lot of our exports go to several European countries and while national currencies are still valid, European banks will increasingly demand that we talk in the Euro," the official said.

As of January 4, large-scale exporters from India will have to process transactions in the euro. "Given that many such transactions are forwarded by Indian banks, Indian exporters need efficient banking services to handle the transactions," the official said. "But we have reports from several exporters that they are having difficulty with Indian banks," the official said.

The EU is India's largest trade partner, accounting for a third of India's exports while India accounts for only 0.5 per cent of EU's total trade. The EU also has the largest direct investment in India.

Exporters sellinggoods in several countries can have much to gain from the euro. "Price denomination in a single currency can cut both ways," the official said. "It can open up more markets, but it can also bring down prices of goods imported into Europe," he said.

A "partenariat" between India and the EU is due to be held in March to smooth out difficulties following introduction of the Euro. "But we still need not be as underprepared as we are," the official said.

Indian banks need to move fast to give Indian exporters the competitive edge, the official said. The Indian trade basket to the EU is heavy with textiles, garments and leather goods and in all it faces stiff competition from China.

"The better prepared Indian banks are to conduct financial deals in the euro, the more of a competitive edge Indian exporters will have," the official said.

"In each field, Indian traders will need to make a careful examination of the consequences of dealing in the euro," the official said. "For that, exporters need thesupport both of banks and of the Indian government."Reduced exchange differences can ease complications with currency transfers and improve profit margins, the official said.

"But the day is here and many in India doing business with Europe are still not sure how to take advantage of this," the official said.