Adani Group: Banking sector resilient amid stock rout, says RBI
Virendra Pandit
New Delhi: Amid some concerns over lenders’ financial health because of the stock rout in the Adani Group in recent days, the Reserve Bank of India (RBI) on late Friday said the country’s banking sector remained resilient in terms of its assessment, and bank exposures to companies were well within norms.
“There have been media reports expressing concern about the exposures of Indian banks to a business conglomerate. As the regulator and supervisor, the RBI maintains a constant vigil on the banking sector and on individual banks with a view to (maintaining) financial stability,” the central bank said, according to the media reports on Saturday.
The banking regulator’s statement, however, did not mention the Adani Group, which lost Rs 9.1 trillion in market capitalization after a little-known US-based short-seller, Hindenburg Research’s report last week claimed the Indian business conglomerate indulged in stock manipulation and accounting fraud.
India’s banks have an exposure of Rs 80,000 crore to the Adani conglomerate, with the top lender, State Bank of India, leading the pack with Rs 27,000 crore. On Wednesday, the RBI asked banks to give information about their outstanding exposure to the Adanis and the sanctioned amounts.
“As per the RBI’s current assessment, the banking sector remains resilient and stable. Various parameters relating to capital adequacy, asset quality, liquidity, provision coverage, and profitability are healthy. Banks are also in compliance with the Large Exposure Framework (LEF) guidelines issued by the RBI,” the statement said.
According to the RBI, the Central Repository of Information on Large Credits (CRILC) database system, where the banks report their exposure of Rs 5 crore and above, is used for monitoring.
SBI Chairman Dinesh Khara said the bank’s loans to the Adani Group were only 0.88 percent of its total, which was around Rs 31 trillion.
The loans are backed by tangible assets and cash flow, and the bank has not extended any loans against shares, Khara said while announcing the October-December earnings.
“This covers everything, including letters of credit, bank guarantees are given for performance and a small investment of Rs 285 crore,” he said.
“We do not envisage any challenge regarding their ability to service their loan obligations. As for market prices of stocks it would neither impact margin calls nor affect loans they have taken from SBI,” Khara said, adding the Adani Group had an “excellent track record” for repayment in the past.
Another large public-sector lender, Bank of Baroda, has an exposure of around Rs 5,500 crore, said Sanjiv Chadha, Managing Director, and Chief Executive Officer.
A third public-sector lender, Punjab National Bank, said it has an exposure of Rs 7,000 crore to the Adani Group.
