The euro made its first commercial debut in India on Friday when State Bank of India and ABN Amro struck a $5-million euro deal at the rate of $1.1740 per euro. A few other stray deals were also reported on Friday in India as the rest of the world's markets were closed for New Year holidays. The Indian deal on Friday suggests that the euro has appreciated slightly against the dollar from Thursday's ecu pricing at $1.168. Bankers expect a lot of volatility on the euro over the next two weeks. kIndian banks are expected to convert most of their legacycurrency positions into the euro in the coming days. Liquidity in the legacy currencies will reduce substantially even though one is allowed to maintain legacy currency positions till December 31, 2001. A lot will also depend on the Reserve Bank of India's decision on when to convert a portion of its reserves into euro, which is expected soon. Major Indian banks have spruced up their foreign offices to handle euro trade for smaller Indian banks under correspondent banking relationships.

Indian banks will save on transaction costs with the advent of the euro. Currently, each bank has at least one nostro account for each European currency and sometimes more than one. Although this will probably not change at the outset, the need for banks to hold a cash account in each member state of the euro area will gradually diminish once their principal correspondents are able to offer a clearing service throughout the European Monetary Union (EMU). Indian banks will now, technically, need only one euro account anywherein EMU countries for payments in any of them.The big three -- State Bank of India, Bank of Baroda and Bank of India -- have equipped their European branches for offering speedy services in euro for their correspondent Indian banks. Bank of Baroda, which has a branch in Brussels -- the self-proclaimed headquarters of the European Union -- is positioning its physical proximity to the European Central Bank and clearing system to sell its correspondent banking business. Banque Nationale to set up hotline:

Banque Nationale de Paris (BNP) has set up a toll free `euro hotline' at its Mumbai and New Delhi branches to help Indian corporates in all euro-related queries. "The euro is a major event and we stand ready to help corporates meet the challenges of this new opportunity. However, this event will certainly trigger many questions with regard to India's dealings with the euro zone. To help corporates better understand the intricacies of this new currency and if needed to assist them in preparing for theircompany's changeover to the euro, we have set up for their use an exclusive euro hotline," said a BNP press release.