Banks exposure to Adani group ‘insufficient’ to pose credit risk: Fitch Ratings

Fitch estimated that loans to all Adani group entities generally account for 0.8-1.2 per cent of total lending for banks rated by the agency, equivalent to 7-13 per cent of total equity.

Livemint
Published7 Feb 2023, 06:15 PM IST
The offices of Fitch Ratings building appears empty in Canary Wharf.
The offices of Fitch Ratings building appears empty in Canary Wharf.(REUTERS)

The exposure of banks to the Adani Group is ‘insufficient in itself’ to present a substantial risk to the credit profiles of the lenders, said Fitch Ratings in a note on Tuesday.

This comes at a time when investors have been worried about various banks' exposure to the after US based  short-seller Hindenburg Research alleged  improper use of offshore tax havens and stock manipulation by the Adani Group.

Adani Group ha denied any wrongdoings.

Fitch estimated that loans to all Adani group entities generally account for 0.8-1.2 per cent of total lending for banks rated by the agency, equivalent to 7-13 per cent of total equity.

"Even in a distress scenario, it is unlikely that all of this exposure would be written down, as much of it is tied to performing projects," it said.

The ratings agency's unit, CreditSights, said that State Bank of India's exposure to the group is "well-manageable" given its strong buffer of provision reserves. State Bank of India, has an exposure of 27,000 crore.

“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.

CreditSights pointed out that SBI has a provision reserves buffer of around 338 billion rupees ($4.08 billion), or around 1% of net loans.

It added SBI also has the capacity to generate significant pre-provisioning operating profit, or income before taking into account future bad debt provisions.

Additionally, most of the bank's exposure to the Adani Group was secured by completed and cash-generating assets while the rest of the exposure was to on-schedule, under-construction projects, said CreditSights.

Although SBI has some non-funded exposure, it comprises letters of credit and bank guarantees that do not relate to equity raising or acquisition activities, it added.

Fitch, however, cautioned that Indian state banks could face pressure to provide refinancing for Adani entities if foreign banks scale back their exposure or investor appetite for the group's debt weakens in global markets.

"This could affect our assessment of the risk appetite of such banks, particularly if not matched with commensurate building of capital buffers."

To allay concerns, the Reserve Bank of India (RBI), as the country's banking regulator, has said that the Indian banking system remains resilient and stable.

Catch all the Business News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

MoreLess
First Published:7 Feb 2023, 06:15 PM IST
Business NewsNewsBanks exposure to Adani group ‘insufficient’ to pose credit risk: Fitch Ratings

Get Instant Loan up to ₹10 Lakh!

  • Employment Type

    Most Active Stocks

    Tata Steel share price

    149.70
    07:18 PM | 1 NOV 2024
    1.05 (0.71%)

    Indian Oil Corporation share price

    145.00
    07:19 PM | 1 NOV 2024
    2.3 (1.61%)

    Tata Power share price

    445.20
    07:19 PM | 1 NOV 2024
    5.15 (1.17%)

    Bandhan Bank share price

    183.65
    07:10 PM | 1 NOV 2024
    1.4 (0.77%)
    More Active Stocks

    Market Snapshot

    • Top Gainers
    • Top Losers
    • 52 Week High

    Rainbow Childrens Medicare share price

    1,545.00
    06:59 PM | 1 NOV 2024
    -67.25 (-4.17%)

    ICICI Securities share price

    833.45
    06:59 PM | 1 NOV 2024
    -32.85 (-3.79%)

    Vijaya Diagnostic Centre share price

    966.70
    06:59 PM | 1 NOV 2024
    -30.35 (-3.04%)

    Narayana Hrudayalaya share price

    1,235.60
    06:59 PM | 1 NOV 2024
    -36.75 (-2.89%)
    More from Top Losers

    Brigade Enterprises share price

    1,244.80
    07:19 PM | 1 NOV 2024
    71.75 (6.12%)

    PCBL share price

    432.15
    07:17 PM | 1 NOV 2024
    21.35 (5.2%)

    Piramal Pharma share price

    281.85
    07:17 PM | 1 NOV 2024
    13.45 (5.01%)

    Jubilant Pharmova share price

    1,273.00
    06:59 PM | 1 NOV 2024
    60.65 (5%)
    More from Top Gainers

    Recommended For You

      More Recommendations

      Gold Prices

      • 24K
      • 22K
      Bangalore
      80,565.00-790.00
      Chennai
      80,571.00-790.00
      Delhi
      80,723.00-790.00
      Kolkata
      80,575.00-790.00

      Fuel Price

      • Petrol
      • Diesel
      Bangalore
      102.92/L-0.06
      Chennai
      101.23/L0.43
      Kolkata
      104.95/L0.00
      New Delhi
      94.77/L0.00

      Popular in News

        HomeMarketsPremiumInstant LoanMint Shorts