BENGALURU (Reuters) -The Reserve Bank of India (RBI) said on Friday that the country’s banking system remains resilient and stable, amid concerns about the exposure of lenders to the embattled Adani Group.
“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 guidelines issued by the RBI,” the central bank said.
The RBI added it remains vigilant and continues to monitor the stability of the country’s banking sector.
The RBI said it was issuing the comments as there had “been media reports expressing concern about the exposures of Indian banks to a business conglomerate”. It did not name the Adani Group.
The rare statement from the central bank comes amid concerns that the free-fall in shares of Adani group companies in response to Hindenburg Research’s report last week suggests a risk lurking for India’s banking sector, which is just emerging from a decade-long clean-up of bad loans.
Over this period, the RBI has built a database of exposure of Indian banks to large corporates, intended to act as an early warning system for system risk. This, it said on Friday, is used for monitoring purposes.
Indian banks’ exposure to the Adani group is estimated at 0.5% of total loans by Jefferies, and CLSA estimates the local lenders hold less than 40% of the 2.1 trillion rupees ($25.73 billion) debt of the five largest Adani group companies.
Still, shares of large banks fell in response to the rout in Adani group stocks, with the Nifty Bank index dropping 2.9% since the Hindenburg report was released, while the blue-chip Nifty 50 shedding 1.5%.
Indian banks, too, have come out to ease concerns.
On Friday, India’s largest lender State Bank of India (SBI) said its exposure to the group was at 270 billion rupees or 0.9% of total loans. There is “nothing so far” that is concerning regarding SBI’s exposure to the group, said Chairman Dinesh Khara on the sidelines of the bank’s earnings release.
State-owned Bank of Baroda said its exposure was a quarter of the maximum permissible limit, with Chief Executive Officer Sanjiv Chadha adding that there is “absolutely no concern” about exposure to the Adani group.
While most bankers have maintained that they do not see an imminent risk of default from Adani group companies, they have tightened scrutiny of any fresh loan requests that might come from the group.
(Reporting by Chris Thomas in Bengaluru and Ira Dugal in Mumbai; Editing by Rashmi Aich)
