CLUTCHING a bunch of bank papers, Mrs Lakshmi Rajgopal squeezed through a narrow gated entrance and walked past a long line of customers jostling at the cashier's window.

Some were complaining about the slow service, their voices muffled by the whir and creak of old printers.

This grim, cramped government-owned bank may lack the polish of the more modern private banks springing up nationwide. But to Mrs Rajgopal, a 50-year-old radiologist, it's now the safest place to deposit her family savings.

'When the American financial system is collapsing, I am happy we still have the old-fashioned conservative banks in India. Thank God we did not globalise too much,' she said, sitting down to fill out a form at a Syndicate Bank branch in South Delhi.

'I have been coming to this bank for 30 years. My money is safe here because I know it is a government bank. I am confident that they will not take any unnecessary risk or gamble away my hard-earned money.'

Her view is becoming increasingly common in India and China, which have two of the most heavily regulated financial systems in the world.

In the weeks since the financial meltdown in the US, 'I told you so' has become a mantra in Asia's two biggest developing economies. The glee is particularly strong in view of years of US lecturing on the virtues of the free market.

'We were often scolded by the West about how India's financial sector was over-regulated and we needed to adopt Western best practices,' said Mr Kamal Nath, federal commerce and industry minister, to an audience of cheering business leaders in New Delhi recently. 'We all now know how good those best practices were.'

In light of the US troubles, Chinese officials are considering delaying or scrapping plans to introduce more complex and potentially riskier financial instruments such as futures and stock swaps.

'China doesn't need speed first; China needs quality first,' said Mr Liu Mingkang, chairman of the China Banking Regulatory Commission, at an economic forum last month. 'When the US had its zero-down-payment scheme and reverse mortgage loans, we thought it was ridiculous.'

In China, as in India, ordinary people often pay cash for big-ticket items such as cars, weddings and even houses.

But those habits have been slowly changing. In India, where credit card companies and other lenders have spent millions of dollars on colourful ad campaigns, more young people are borrowing money.

More than 70 per cent of Indian banks are owned and heavily regulated by the government, as a result of the nationalisation of banks in 1969.

'Our regulatory policies relating to banks have been conservative and, I used to think, maybe too conservative. But it turns out that it has paid off well,' said Mr Arvind Virmani, chief economic adviser in the Indian Finance Ministry and a longtime advocate of overhauling the financial sector.

Although change is now being slowed, many analysts say that banks in India continue to sorely lack the capital needed to sustain growth and meet the nation's goal of being a 21st-century economic powerhouse.

One estimate, for instance, says that India's infrastructure-financing needs of US$500 billion ($734b) to $600b cannot be met by the present structure of the banking industry.

Many finance experts said that although India's banks may be isolated from global turmoil, its overall economy is not. Because Indian banks are tight with credit, many private companies are forced to seek investment from abroad.

For instance, new foreign direct investment in the country will total US$25b in the year that began 1 Apr, up 56per cent from that period last year.

But the current crisis could dry up that stream of easy financing.

This article was first published in The New Paper on October 10, 2008.