No systemic risk to Indian financial system: Uday Kotak amid Adani Group's stock rout

Kotak Mahindra Bank Managing Director Uday Kotak doesn't see any systemic risk to the Indian financial system, despite recent dramatic stock falls in Adani Group companies. However, the Kotak Mahindra Bank CEO believes that large Indian corporates rely more on global sources for debt and equity finance.

“This creates challenges and vulnerabilities,” Kotak noted in a Twitter post on Sunday, adding, “Time to further strengthen Indian underwriting and capacity building.”

His tweet comes amid a sharp sell-off in Adani Group companies shares, which led the market into a tailspin. Moreover, banking stocks were impacted on fears of Adani exposure impacting the lenders. 

However, the Reserve Bank of India's (RBI) message that Indian banking system is healthy improved sentiments leading to late rally in banking stocks.

Exposure of banks to Adani Group

Three leading public sector banks have already disclosed their exposure to the Adani Group. The country's largest lender State Bank of India (SBI) has an exposure of ₹27,000 crore, while that of the second biggest Punjab National Bank (PNB) is at ₹7,000 crore.

Another state-owned lender Bank of Baroda has total exposure of ₹7,000 crore, which is also fully secured.

Private sector lender Axis Bank has said its exposure to crisis-ridden Adani Group stands at 0.94 per cent of its net advances.

Government-owned life insurance behemoth Life Insurance Corporation (LIC) has disclosed holdings of ₹36,474.78 crore in Adani group's debt and equity.

SEBI reassures investors after Adani rout

Meanwhile, capital markets regulator SEBI Saturday said that markets were stable and protected from further volatility, following a phenomenal share rout that hit the business empire of Adani.

The securities regulator said in a statement that the country's financial market had "demonstrated ongoing stability and is continuing to function in a transparent, fair and efficient manner".

It further said that it had "put in place a set of well defined, publicly available surveillance measures" for addressing excessive volatility in specific stocks, without naming the Adani conglomerate.

Union Finance Minister Nirmala Sitharaman has also insisted that Indian markets were well regulated and that the controversy would not affect investor confidence.

Earlier this week Adani cancelled a ₹20,000-crore stock sale meant to help reduce debt levels – long a concern – restore confidence and broaden its shareholder base.

Big banks, including Credit Suisse and Citigroup, have stopped accepting Adani bonds as collateral for loans to private clients, Bloomberg News reported, fuelling worries about how the conglomerate will raise fresh funds.

Stocks of Adani Group firms have taken a massive beating on the bourses since US short-seller Hindenburg Research released an explosive report in late January. 

The US-based research firm has made a litany of allegations in a report, accusing Adani of accounting fraud and artificially boosting its share prices, calling it a "brazen stock manipulation and accounting fraud scheme" and "the largest con in corporate history".

However, the group has rejected the allegations.

The combined market cap of Adani Group's listed companies has collapsed by around $120 billion – about half of the conglomerate's value.