The Reserve Bank of India (RBI) on Friday sought to allay the concerns over the exposure of Indian banks to the Adani Group by saying that “as per its current assessment, the banking sector remains resilient”. However, the central bank remains vigilant and continues to monitor the stability of the banking sector. It, however, didn’t mention the Adani Group and referred to a business conglomerate.
In its first public reaction on the issue, the central bank said 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 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.
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Earlier in the day, while the government said it has nothing to do with the issues of the Adani Group, even as the issue continued to rock both Houses of Parliament, finance minister Nirmala Sitharaman told Network18 that banks in India are on a sound footing. “The State Bank of India and Life Insurance Corporation have very clearly said that their exposure (to Adani Group stocks) is very well within the permitted limits and with valuation falling as well, they are still over profit. That is the word from the horse’s mouth,” the FM said.
She also said the Indian banking system, having gone through the twin-balance sheet problem, is today at a comfortable level with non-performing assets coming down to absolutely low levels, recoveries and a sound position. “The entire macroeconomic analysis which any expert would do also reflects the Indian banks are placed, that cannot be so if they are at risk,” she added.
State Bank of India (SBI) followed suit and said its exposure to the Adani Group is fully secured by cash generating assets. SBI chairman Dinesh Kumar Khara said there is no lending against shares to the conglomerate and that the bank’s total exposure to the Adani Group is 0.9% of the overall loan book. Another public sector lender Bank of Baroda said its total exposure to the embattled group stood at `7,000 crore, which is also fully secured.
The clarifications follow widespread concerns over seven listed Adani Group companies having lost more than half their market capitalisation, which shrivelled to less than $100 billion, after a report by Hindenburg Research questioned the conglomerate’s debt levels and use of tax havens.
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Meanwhile, the shares of Adani Group saw wild swings in the market. Flagship Adani Enterprises recovered to end 1.25% higher to close at `1,584 after slipping more than 25% intra-day. ACC, Ambuja Cements and Adani Ports & SEZ also ended in the green.
Other stocks, however, continued to hit their lower limits. Adani Transmission and Adani Green Energy tanked by 10%, while Adani Total Gas, Adani Power and Adani Wilmar were down 5% each.