RBI on Adani: Exposure of Indian banks to group not significant, lenders resilient and strong

Gautam Adani, Chairman, Adani Group

Reserve Bank of India (RBI) Governor Shaktikanta Das on February 8 said the Indian banking sector, including non-banking finance companies (NBFCs), continues to be strong and their exposure to the crisis-ridden Adani group was not a cause for major concern.

"I will only add that the Indian banking sector is resilient and strong," said Das speaking at post-policy presser at the central bank. He said in the last three-four years, the RBI has taken a number of steps to strengthen this resilience.

"We have come out with clear guidelines to regulate banks.  There are guidelines on  audit committees. We also made mandatory for appointment of chief risk officers in banks," Das said.

Adani group slipped into probably the worst crisis in its history after a US short-seller research report pointed out gaps in the group's financials. Shares of group companies have fallen sharply after the release of the report.

Subsequently, concerns arose after reports said a number of large Indian banks have both fund and non-fund based exposure to the group, which a CLSA report estimate to be 38 percent of the total debt of the firm.

That apart, bonds and commercial papers constitute 37 percent, 11 percent is borrowing from financial institutions, and the remaining 12-13 percent is inter-group lending, the report said.

The company has denied any problems on liquidity or meeting repayment obligations.

Bank exposure to Adani not significant 

Deputy Governor MK Jain said the exposure of Indian banks and NBFCs to Adani group not significant. “Domestic banking exposure is against underlying assets not based on market cap. Exposure, as of now, is not very significant," said Jain.

Das said large exposure guidelines are fully complied with banks. “Strength and resilience of banks are much larger and stronger to be affected by an individual case. Banking system is strong,” Das said.

Also, when banks lend money to companies, they do not lend based on market capitalisation but on the basis of strength and fundamentals of company, Das said.

Banks confident

Banks too have clearly said there are no immediate threats from Adani group exposure. State Bank of India, India's largest lender, in a post-earnings press conference said that its total exposure to the Adani Group stands at Rs 27,000 crore, or 0.8 percent of the overall book. Chairman Dinesh Khara said that there are no challenges concerning the conglomerates' debt servicing abilities.

Similarly, Bank of Baroda's exposure to the Adani Group does not rank among the bank's top 10 exposures, the bank’s chief said recently. Also, Punjab National Bank MD and CEO Atul Kumar Goael said that the lender's total exposure to the group is around Rs 7,000 crore, of which Rs 6,300 crore is funded exposure. Goel said that PNB has an exposure of Rs 2,500 crore for the airport's business.

One of the largest private sector lenders, Axis Bank, in a statement to the exchanges, said that its total outstanding as percentage of net advances to Adani Group companies stood at only 0.94 percent as of December 2022. IndusInd Bank said that its total loan outstanding towards the Adani Group is pegged at 0.49 percent of its loan book.