The Reserve Bank of India (RBI) said on Friday that the banking sector remains resilient and stable amid reports of Indian banks’ exposure to the Adani Group, even as the heads of major banks in the public sector stated that their exposure to the conglomerate is well within regulatory limits.
The heads of State Bank of India (SBI) and Bank of Baroda (BoB) stressed that their exposure to the Adani Group is against tangible assets that generate adequate cash flows.
Adani Group is in the eye of the storm following adverse observations from US-based short seller Hindenburg Research regarding accounting practices, related party transactions and concentrated share ownership by some firms foreign investment, among others.
RBI, in a statement, underlined that, based on its current assessment, the banking sector remains resilient and stable.
“Several parameters related to capital adequacy, asset quality, liquidity, provision coverage and profitability are healthy. Banks also comply with the Large Exposure Framework (LEF) guidelines issued by the RBI.
“The RBI remains vigilant and continues to monitor the stability of the Indian banking sector,” according to the statement.
The central bank noted that, as regulator and supervisor, it maintains constant vigilance over the banking sector and individual banks with a view to maintaining financial stability.
The RBI has a Central Credit Information Repository for Large Credits (CRILC) database system, where banks report their exposure of ₹5 crore and above, which is used for monitoring purposes, it added.
SBI Chairman Dinesh Kumar Khara said: “We have lent Adani [group companies] for projects, which in fact have tangible assets and adequate cash generation. They have been in a position to fulfill their obligations.”
The bank’s outstanding exposure is only 0.88 percent (including fund-based and non-fund-based exposure, bank performance guarantees, and financial guarantees required in the normal course of business) of its total loan book at December 31, 2022.
“So from that standpoint, we don’t foresee any kind of challenge in terms of their ability to meet the obligations of the loans they’ve taken out…,” Khara said, adding that the group’s assets showed an excellent repayment history. . in the past.
It noted that SBI has not issued any guarantees to secure any of the financial obligations or acquisitions.
“There is nothing that we have done that could worry us… all the organizations (credit committees and sanctioning authorities) will be attentive to what the situation is and decisions will be made accordingly.
“We have not yet initiated any special engagement with the group. If necessary, we will engage with them… For us, at the moment, there is no concern,” Khara said.
BoB CEO and CEO Sanjiv Chadha stressed that his bank’s exposure to the business conglomerate is currently a quarter of the large exposure framework cap (includes outstanding balances, undisturbed loans and non-based caps). funds) from RBI.
In addition, the exposure to the group as a percentage of the balance sheet has been reduced in the last 2-3 years.
“Of the exposure that is out there, 30 percent is either a joint venture with a public sector company or secured by a guarantee from a public sector company,” he said.
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