Confirming the development, one senior SBI executive said: "They have done this but it will not have any impact on our operations. There is no ban on bilateral overdraft limit as yet." Bank of India as well as Bank of Baroda officials said the clampdown will not have any adverse impact on Indian banks' operations.

The Indian banks have been told to ensure availability of funds in their clearing accounts before making payments, state-run banking industry sources said.

"The withdrawal of the limit is a temporary phenomenon. They (the US banks) have sought clarifications from the administration and will soon get back to us," SBI sources said.

US president Bill Clinton announced the imposition of economic sanctions against India under the Arms Export Control Act, as amended by the Nuclear ProliferationPrevention Act of 1994. Sanctions under the Act include prohibition of extension of credit by US government agencies to Indian entities, prohibition of loans by US banks to Indian government entities and restrictions on sales of certain goods and services to India by US companies. Besides, it also calls for opposition by the US to World Bank and IFC assistance to India. The perception is that the State Bank is a government entity and hence the clampdown, the SBI official said.

Following the ban on intra-day overdraft facilities, the Indian banks will not be able to run up debit positions during the day. The cheques will only be passed for payments if there is credit balance.

Under the "chip" system of the Federal Reserve's clearing system, the clearing banks offer unconfirmed overdrafts in case of a shortfall. The clearing banks have denied Indian banks the benefit of unconfirmed line of credit, sources said. "This will not have any impact since we do not use this facility," the SBI officialsaid.

According to banking industry sources, even if the US banks decide to withdraw the bilateral overdraft facility, the Indian banks will remain unaffected as there is enough liquidity. "About 80 per cent of our resources is the steady deposit base. We have enough surplus funds and there is no cause of concern," a Bank of Baroda official said.

Among the Indian banks, the State Bank of India has the largest presence in the US with seven branches and one representative office in Washington while Bank of India and Bank of Baroda have two branches each. The development is a direct fallout of the punitive US sanctions imposed against India after it conducted a series of nuclear test blasts this week.

The impact will not be very significant as Indian banks do not have large positions. However, if they want to make a large remittance to a corporate, the corporate will have to provide funds in advance as they are no longer entitled to avail of the overdraft facility.

All the three Indian banks operating inthe US reiterated they do not have any problem on the liquidity front and it has been business as usual for them in the US.

Bankers said they were unsure how the sanctions would affect lines of credit used by Indian banks from US banks.

Rough estimates -- based on year-ago figures -- indicate Indian banks currently have around $ 1.0 billion in lines of credit from US banks out of around $ 4.0 billion from all international banks, bankers say.