Exposure Of Banking Sector To Adani Group Shares Insignificant, Says RBI

Without naming Adani Group the RBI governor Shaktikanta Das said that RBI has taken a number of steps for resilience of banking sector

Outlook Business Desk

Updated on: 8 February 2023 1:05 pm

Shaktikanta Das at IMF conference

The Reserve Bank of India (RBI) on Wednesday clarified that Indian banking sector is stable and strong while clarifying that banking sector exposure to Adani Group shares is insignificant.

Without naming Adani Group the RBI governor Shaktikanta Das said that RBI has taken a number of steps for resilience of banking sector that include mandatory appointment of Chief Risk Officer and Chief Compliance Officer with the Chief Risk Officer directly answerable to the credit rating agencies.

"I would like to add Indian banking and NBFC sector continues to remain strong and resilient," Governor Das said.

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"As per our assessment large exposure guidelines prescribed by the RBI are being fully complied by banks. The whole perception is coming because of market capitalisation of the group. When banks lend money to a company or a group of companies, the banks do not lend on the basis of market capitalisation of a particular company. The banks lend on the basis of strength and fundamentals of the company, anticipated cash flows and so many other things go into appraisal of banks and appraisal methods of Indian banks have significantly improved over the years. I would reiterate again that banking system is stable and continues to be strong,” Governor Das said

"Domestic banks exposure is against the underlying assets, operating cash flows and projects under implementation and not based on market capitalisation. As of now exposure is not very significant across all the banks and NBFCs. Exposure against shares of domestic banks is insignificant," deputy Governor M K Jain added.

Adani Group shares have seen a massive selloff after US-based short seller Hindenburg Research leveled allegations of fraud and stock manipulation. Following the report many large foreign financial institutions like Credit Suisse and Citigroup stopped taking Adani Group securities as collateral against margin loans.

Earlier in the day, RBI hiked repo rate by 25 basis points to 6.5 per cent.