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Business News/ Companies / News/  Banks wary of giving new loans to Adani group even as RBI takes stock

Banks wary of giving new loans to Adani group even as RBI takes stock

Local lenders are wary of providing new loans, at least in the near term, with officials from RBI requesting data on exposure to the conglomerate

RBI officials are said to have requested data on banks’ exposure to the conglomerate (Photo: Mint)Premium
RBI officials are said to have requested data on banks’ exposure to the conglomerate (Photo: Mint)

Local lenders to the Adani group are wary of providing new loans to the group, at least in the near term, two senior bankers said, with one saying that officials from the Reserve Bank of India (RBI) last week requested data on the bank’s exposure to the conglomerate.

Bankers have become cautious of their involvement with the group after the US-based Hindenburg Research alleged stock manipulation and fraud by Adani Group companies. The Adani group has, in turn, called the allegation “a malicious combination of selective misinformation and concealed facts relating to baseless and discredited allegations to drive an ulterior motive".

According to Adani’s statement, the banks that deal with it include State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda, among others. The group’s aggregate gross debt is about $30 billion, of which local banks have a share of $9 billion, chief financial officer Jugeshinder ‘Robbie’ Singh told CNBCTV18 on Monday.

Bankers said the group companies have been regularly servicing their loans and do not foresee any change in repayment behaviour, even as they want to wait till the dust settles before assessing any new loan proposals.

While Adani still has unutilized credit lines, bankers said they expect more loan demand in future if the Hindenburg allegations make foreign lending more expensive for the company.

“Frankly, it would be difficult for me to present a new loan proposal from the group to my board for approval. That is not to say we will stop lending to Adani; it is a strong group, and we only want to wait for a few months till things are sorted," he said.

One of the bankers cited above said a senior supervisory manager of RBI has asked for data on the quantum of exposure the bank has to various Adani group companies.

He said that this seems like a preliminary assessment of the banking sector’s exposure to the corporate group, given the discussion around it.

“We have given loans against assets with strong cashflows and, therefore, have nothing to worry about so far," the banker said.

While the regulator would not be concerned about reports specific to a company, they ask for details from lenders to ascertain whether there is a systemic risk, a former Reserve Bank official said on condition of anonymity.

He added that RBI officials, typically a deputy general manager or a general manager, depending on the size of the bank, acts as senior supervisory manager for a lender.

“Allegations in the report are in the domain of the markets regulator, and RBI must only be looking at it from the broader financial system risk perspective," the former regulatory official said.

Spokespeople for RBI, SBI and the Adani group did not respond to emails seeking comments.

On 26 January, Hong Kong-based brokerage and investment group CLSA said that Indian banking exposure is less than 40% of the total Adani group debt. Of that, the exposure of private banks is below 10% of total group debt, while PSU banks have 30% of group debt.

State-run Punjab National Bank’s total exposure to the group is 7,000 crore, chief executive A.K. Goel told reporters on Monday.

Of the total exposure, 2,500 crore is for airport projects. While Punjab National Bank’s fund-based exposure is 6,300 crore, non-fund exposure is 700 crore.

“As on date, there is no worry. We are keeping a close watch on the development," Goel said.

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Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Published: 31 Jan 2023, 12:07 AM IST
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