Bank of Baroda MD and CEO Sanjiv Chadha on February 3 told Moneycontrol that his bank will continue to lend to the Adani group if the group account meets the lender's underwriting criteria.
“For us, any lending decision is based upon, again, the assessment of risk and the return on that particular exposure. I don't think we will be changing that at all. Anything that meets our underwriting criteria is a lendable proposition for us,” Chadha said.
Meanwhile, the Reserve Bank of India (RBI) on February 3 imposed monetary penalties on Bank of Baroda, North East Small Finance Bank, and Krazybee Services Private Limited for rule violations.
Also read: FM Sitharaman on Adani: LIC, SBI exposure to group within permissible limits
The central bank imposed a Rs 30 lakh penalty on Bank of Baroda, Rs 42.48 lakh on Krazybee Services Private Ltd, and Rs 39.50 lakh on North East Small Finance Bank.
The RBI's inspection report on Bank of Baroda showed that the lender breached the transaction limits in small accounts and failed to ensure that the interest rates applied in certain term deposit accounts were as per the schedule of interest rates disclosed in advance, a release said.
Largest PSU Bank on Adani’s issue
State Bank of India’s (SBI) Chairman Dinesh Khara, on February 3 said the lender’s exposure to the Adani Group is around Rs 27,000 crore or 0.8 to 0.9 percent of its loan book and repayments are on track, implying there is no concern as of now.
“We have lent to Adani for projects which have tangible assets and have adequate cash collections. They are able to meet obligations. It is only 0.8-0.9 percent of our loan book,” Khara said at the press conference after announcing the bank's third-quarter results.
Various companies of the Adani Group witnessed a massive fall in their valuation with their shares tanking between 20 to 35 percent.
BoB's Chadha has reassured stakeholders that the improvement that has been seen in the performance of the bank, whether it is in terms of asset quality, credit costs, growth, or in terms of margins, is likely to continue.
“It's most unlikely that there will be any impact of this. Now, in terms of this particular case, it is not for me to comment on any business group, but what I can talk to you about is the impact or the potential impact on the bank as such. Because you, again, would want to understand what could be the potential impact on the bank,” says one of the largest PSUs' MD.
Key indicators Shared By Chadha
According to the MD & CEO of one of the biggest lenders to Adani, one indicator is that "this group in terms of the large exposure framework, and computation does not figure among the top 15 group exposures for us. It's a relatively small exposure for us," the CEO said.
Another indicator is that RBI's large exposure framework includes outstanding, non-fund base limits and undisbursed loans. “As per that, it allows you to have a certain amount of exposure to any given group. Now, as compared to that limit, we have only about 25 percent of it,” the BoB MD said.
Chadha added that as compared to other group exposures, exposure to the Adani group is too small.