The Reserve Bank of India (RBI), on Friday, said the banking sector remains resilient and stable in the backdrop of reports about Indian banks’ exposure to Adani Group even as the chiefs of top public sector banks stated that their exposure to the conglomerate is well within regulatory limits.
State Bank of India (SBI) and Bank of Baroda (BoB) chiefs emphasised that their exposure to the Adani Group is against tangible assets that are generating adequate cash flows.
Adani Group is in the eye of a storm following adverse observations by US-based short-seller Hindenburg Research regarding accounting practices, related-party transactions, and concentrated shares ownership by a few overseas investment firms, among others.
RBI, in a statement, underscored that as per its 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 RBI remains vigilant and continues to monitor the stability of the Indian banking sector,”per the statement.
The central bank observed that as the regulator and supervisor, it maintains a constant vigil on the banking sector and on individual banks with a view to maintain financial stability.
The RBI has a Central Repository of Information on 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 to Adani [group companies] for projects, which are in fact having tangible assets and adequate cash generation. They have been in a position to meet their obligations.”
The bank’s outstanding exposure is just 0.88 per cent (including fund-based and non-fund based exposure — performance bank guarantees and financial guarantees required in the normal course of business) of its total loan book as of December 31, 2022.
“So, from that point of view, we don’t envisage any kind of challenge in terms of their ability to service the loans obligations, which they have taken….,” said Khara, and added that the groups assets displayed excellent repayment record in the past.
He noted that SBI has not issued any guarantee towards securing any of the financial obligations or acquisitions.
“There is nothing we have done which can cause a concern for us...every body (credit committees and sanctioning authorities) will be mindful of what the situation is and accordingly decisions will be taken
“We have not yet started any special engagement with the group. If need be, we will engage with them…For us, for the time being, there is no concern,” Khara said.
BoB MD & CEO Sanjiv Chadha underscored that his bank’s exposure to the business conglomerate is currently one-fourth of the Iarge exposure framework ceiling (includes outstandings, undisturbed loans and non-fund based limits) of RBI.
Moreover, exposure to the group as a percentage of the balance sheet, has come down over the last 2-3 years.
“Of the exposure that is there, 30 per cent is either in joint venture with a public sector company or secured by a guarantee of a public sector company,” he said.
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