RBI Governor Shaktikanta Das today sought to allay concerns on the banks’ financial health in the aftermath of Adani-Hindenburg showdown, reiterating the resilience of the banking system, while steering clear of making any comment on Adani Group business itself. Hindenburg alleged that the Adani Group is overleveraged, which prompted questions regarding Indian banks’ exposure to the indebted conglomerate. To this, RBI Governor Shaktikanta Das spoke about the inherent strength of the domestic banking system, shortly after the Monetary Policy announcement of a 25 bps repo rate hike.
“The Reserve Bank has taken a number of steps to strengthen the resilience of Indian banks,” said Governor Das, adding that the central bank has made it mandatory for lenders to appoint chief risk officers and chief compliance officers. “We have also rationalised, in the last two years, the large exposure to norms. Last Friday, as the Adani rout continued to simmer, RBI said 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 the banks report their exposure of Rs 5 crore and above which is used for monitoring purposes.”
The central bank also added that the banking sector is 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,” said the note. The Governor ensured not to make overt comments or mention the name of the Group, instead said, “Regarding the exposure of one particular business conglomerate, we have issued a press release on last Friday; I have nothing more to add to that. Individual cases and numbers we do not discuss in the public domain.”
The Reserve Bank of India hiked its key repo rate by 25 basis points on Wednesday as expected but surprised markets by leaving the door open to more tightening, saying core inflation remained high. The central bank said that its policy stance remains focused on the withdrawal of accommodation. Most analysts had expected a hike on Wednesday to be the final increase in the RBI’s current tightening cycle, which has seen it raise rates by 250 bps since May last year.