RBI says all the exposure values of a bank to a group of connected counterparties must not be higher than 25 per cent of the bank's available eligible capital base at all times
The country's largest lender SBI on Friday said its overall exposure to the Adani Group is at 0.88 per cent of the book or around Rs 27,000 crore. SBI chairman Dinesh Khara said the bank does not envisage the embattled ports-to-mining group facing any challenge to service its debt obligations and stressed that SBI has not given any loans against shares to the group.
Lending to Adani Group projects is with regard to ones having tangible assets and adequate cash flows, Khara said, adding that the group has an excellent repayment record. He also said there has not been any refinance request, which has come from the Adani group.
When asked if the group is changing its diligence practices with regard to the Adani Group, given the ongoing events, Khara said the lender always insists on adequate equity to be brought in before releasing any amount. "Unless the equity is seen, the amount is not released…It is not so that we are waiting for any equity. Going forward as well, each of such proposals will be evaluated on its own merit. It is a decision with credit committees," he said.
Aditionally, Bank of Baroda also said that it has reduced exposure to the embattled Adani Group entities over the last two years, and has no concerns on asset quality issues with the conglomerate. The bank's managing director and chief executive Sanjiv Chadha told reporters that the bank's overall exposure to the ports-to-media conglomerate's entities is one fourth of the single group exposures allowed under the Large Exposures Framework (LEF) but refused to share a number.
The LEF said that, RBI says all the exposure values of a bank to a group of connected counterparties must not be higher than 25 per cent of the bank's available eligible capital base at all times. Without revealing the quantum of investments, Chadha said that 30 per cent of the bank's total exposure to Adani group companies is towards entities that are in joint venture with state-run entities or the exposure is backed by a guarantee from government-owned entities. The overall exposure has reduced as a percentage of the balance sheet over the last two years, added Chadha.
Answering a specific question on Adani Group exposures, the MD and CEO of the bank added that is "absolutely no concern" from an asset quality perspective and there is no request from the group for refinance as well. The going has been tough for the Adani Group over the last week since the release of Hindenburg Report alleging it to be the biggest con in corporate history, by indulging in fraudulent transactions and share price manipulation. The Conglomerate was forced to cancel a Rs 20,000-crore share sale a day after the issue scraped through, because of continued steep decline in share prices.
Amid the rout in the share prices of Adani Group's listed entities - the flagship company plummeted 20 per cent at opening on Friday - Chadha explained that banks give corporate loans not based on share prices but by book value and assets as a collateral. Additionally, most of the loans made to corporate entities are secured, and working capital loans, which constitute a bulk of the exposure to corporate entities, is secured by cash flows.
Chadha commented that the bank's corporate loan book has been performing outstandingly well, and pointed out that the slippage stood at as low as Rs 13 crore for the December quarter as against thousands of crores which the banks used to report earlier. Advances unpaid for over 30 days are also low at just 0.4 per cent of the overall corporate book, which is nearly 44 per cent of the overall domestic loan book. The bank reported a 75.4 per cent jump in its December quarter net at Rs 3,853 crore. The BoB scrip closed 6.20 per cent up at Rs 163.65 a piece on the BSE as against a gain of 1.52 per cent on the benchmark.
(With PTI inputs)