RBI gauges banks' exposure to Adani companies

Mumbai: The Reserve Bank of India (RBI) is said to be assessing the banking system's exposure to the Adani Group which has lost about $100 billion in market value since US short-seller Hindenburg Research's allegations of misgovernance, 'fraud' and price 'manipulation' surfaced a week ago, multiple bankers familiar with the central bank move told ET.

While the central bank periodically monitors all big borrowers and banks' ability to withstand shocks, the latest check follows the market turmoil.

"The central bank has asked all lenders to submit exposure data related to the Adani Group," a senior banker in the know said. "Due to the turmoil in the stocks, the RBI wants to assess if this could lead to a potential problem for the banking system. They are also assessing whether any bank is in breach of the group exposure norms."

The RBI did not respond to ET's mailed query.

According to a recent CLSA report, Indian banks have an absolute debt exposure of close to ₹80,000 crore, amounting to about 40% of the total Adani Group debt, which is nearly ₹2 lakh crore.

State-run banks, led by State Bank of India, have lent about three-fourths of the Indian banking system debt - at 30% of the total. The share of Indian private sector lenders in the total conglomerate's debt was one-fourth - at 10% of the total. Separately, foreign banks have funded large acquisitions made by the group.

While banks claim all their debt is insulated with cash generating assets, a free fall in the Adani Group stocks has prompted the fresh RBI assessment. "Our group exposure limit to Adani is not even 50% of the minimum regulatory cap; our loans are all secured by good functioning assets and our review of the situation suggests that internal accruals will be enough to service bank debt," said a senior official at a large state-run lender.

Since last Wednesday, when the US short-seller Hindenberg Research released a report against the Adani Group, 10 of its entities have lost more than 40% in market capitalisation, running close to ₹9 lakh crore.

According to another bank executive, both the government and RBI have sought information from banks about their exposure to the Adani Group of companies. "We have already submitted the data," he said.

"The regulators want to have an overview of the situation," he said.

There were primarily two inquiries - what is the total exposure, and what is the quantum of outstanding loans given to the group?

Two of the country's top bankers also believed that banks' loan exposure to Adani Group is secured as these are backed by cash flows. Some banks also have investments in debt securities issued by the group, but that is only a small part of the overall exposure, one of them said.