Impressed by the youngster's debut against India, the land of his origin, Underwood told BBC Sports, ''Monty Panesar looks as if he is somebody who, when the ball turns, could bowl a side out.
''Monty looks as if he's got a lot of potential and has learnt a lot in India because of their players and the surfaces you bowl on,'' Underwood said.
The former spinner also said that he would like to see Monty bowl on wickets that offer him assistance.
''I'm very keen to see him bowl on (a pitch) that is turning on the fourth or fifth day and that's when he will be judged.'' He also stressed on the need to have enough runs on the board for a spinner to go all out.
''If England have got runs on the board the spinner can bowl with men up round the bat and it changes the whole aspect of the game.
''If you haven't got runs, spinners have to bowl to defensive fields and that takes away opportunities,'' he said.
Underwood, a nemesis of Sunil Gavaskar in his playing days, was also impressed by England's pace duo of Sajid Mahmood and Liam Plunkett after watching them against Sri Lanka in last weekend's drawn Test.
''It was a simple case of catches win matches and we didn't hold onto them. But I'm sure the new, young bowlers that came on the scene will have learned a lot from the experience of playing at Lord's and it will stand them in good stead.
''It looks as if we've got some potential fast bowlers,'' he added.