Home / Companies / News /  Three large banks have exposure of 40,000 crore to Adani firms

The country’s top three state-run banks have an aggregate exposure of close to 40,000 crore to various entities of the Adani group, disclosures by banks showed, even as lenders and the Reserve Bank of India allayed fears of any stress on banks’ books because of the Adani stock rout.

The exposure to Adani group companies accounts for 0.8% of the total gross advances of the top three state-run banks. The largest lender, State Bank of India, has an exposure of 27,000 crore, while Bank of Baroda and Punjab National Bank have exposures of 5,380 crore and 7,000 crore, respectively. While SBI and PNB have explicitly stated their exposure to the Adani group, Bank of Baroda declined to disclose it but said it is a fourth of the group exposure permitted by the Reserve Bank of India (RBI).

Under RBI’s large exposure framework, banks can lend up to 25% of their total tier-I capital to a connected group of firms and 20% to a standalone entity. Given that BoB’s total tier-I capital stood at 86,105 crore as of 31 December, the regulatory ceiling would be at 21,526 crore, and its exposure to the group—one-fourth of the limit as disclosed by the bank—would be 5,380 crore.

Banks asserted that there were no concerns emanating from their loans and bank guarantees to the Adani group, which has seen its stock value plunge by a staggering $110 billion over seven days since a US short seller, Hindenburg Research, accused the group of stock manipulation and accounting fraud. Adani Group has denied these allegations.

“We have lent to Adani (group) for projects, which are tangible assets and which have adequate cash generation. They have been able to meet their obligations. The bank’s exposure is around 0.88% of the total loan book," said Dinesh Khara, chairman of SBI.

Khara told reporters that the bank does not envisage any challenge in the group’s ability to repay dues. However, he said SBI has not extended any loan against shares.

“Early days; there is absolutely no issue at the moment," said Sanjiv Chadha, chief executive of Bank of Baroda.

“It (BoB’s exposure) is also spread over a large number of companies. However, as a percentage of our balance sheet, this exposure has come down over the past three years," Chadha said, adding that about 30% of exposure to Adani firms is either in joint ventures with public sector companies or is secured by guarantees of public sector firms.

While questions have been raised on the debt level, analysts have assuaged such concerns. Over the past five-six years, the group has diversified its borrowing mix and reduced the share of Indian banks in its borrowings from 86% in FY16 to 33% in FY22, analysts at US-based investment banking and capital markets firm Jefferies said on 26 January. The share of bonds and foreign banks in total debt has risen to 37% and 18% now, it said.

“Both RBI and we know the banking sector today, having gone through the twin balance sheet problem, is at a comfortable level with NPAs coming down to absolutely low levels and recovery happening, and their position is very sound," finance minister Nirmala Sitharaman told CNBC-TV18.

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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