With little clarity on the list of companies that have mark-to-market losses on derivatives transactions, banks are now asking their corporate banking departments to scan the books of borrowers and also seek details of their foreign exchange exposure.

A senior banker said the main focus of the exercise was on small and medium enterprises, which either raised funds overseas or had clients abroad to whom goods were shipped in the last three to four years when complex derivatives deals entered the Indian landscape.

Within this pie, banks are segregating companies with turnover of Rs 30-40 crore (Rs 300-400 million) to Rs 100 crore (Rs 1 billion) and those which are above this threshold.

"Companies with small turnover are more vulnerable as their capacity to withstand the changes in the currency values is limited," said a public sector bank executive.

While bankers are awaiting the fourth quarter results to begin searching for the numbers hidden in the contingent liability, corporate lending branches have also been alerted to seek details from borrowers on the kind of exposure to foreign currencies and derivatives, in particular.

In any case, bankers said the recent spate of cases had made them more cautious and foreign banks, which were hawking complex derivatives products to Indian clients using local banks as intermediaries, had also not been pushing exotic instruments.

A number of companies have gone to court against banks that had sold derivatives instruments.

Derivatives are financial instruments, whose value changes in response to changes in underlying variables.

Companies enter into derivatives contracts like futures, forwards, options, and swaps to hedge their currency and interest rate risks.

So far, most of the disputes involve new-generation private banks like ICICI Bank [Get Quote], Axis Bank, Kotak Mahindra Bank [Get Quote] and Yes Bank [Get Quote].

While ICICI Bank and Kotak Mahindra Bank are yet to disclose their fourth quarter results, on Monday, Axis Bank said 188 derivatives transactions outstanding at the end of March were facing aggregate mark-to-market losses of Rs 673.5 crore (Rs 6.73 billion).

Of these, 113 outstanding transactions pertain to forex derivatives, where the aggregate MTM is estimated at Rs 547.72 crore (Rs 5.47 billion).

However, so far, six transactions have been repudiated by two customers -- Rajshree Sugars & Chemicals and Nahar Industries -- involving an MTM loss of Rs 71.97 crore (Rs 719.7 million) to the companies, for which the bank has made provisions.

Earlier this month, Yes Bank had said it was engaged in talks for an out-of-court settlement with one of its client, but refused to disclose further.