LIC,SBI Break Silence Over Adani Row

“As far as the quantum (of loans to the Adani Group) is concerned, that is about 0.8-0.9 percent of our total loan book.

Breaking its long-awaited silence since the Adani Group stocks started falling after US-based Hindenburg Research last week leveled allegations of “brazen stock manipulation and fraud” against the group’s companies, the government Friday said the exposure of banks and insurers was within “permitted limits”. Reported The Indian Express. 

“Both SBI and LIC have issued detailed statements… the Chairperson, the CMD has himself come out and explained how they are not overexposed… and also said, look, we are sitting over profits for the exposure… They have very clearly said their exposure is well within the permitted limits and they are even now – with the valuation falling as well – sitting over profit,” Union Finance Minister Nirmala Sitharaman said in an interview with Network18.

Asked about the nervousness in the stock markets, Sitharaman said they will continue to hold high. “The immediate impact of the Budget on the market and subsequent to, let’s say for whatever reason, it trailed back, I think in the next few days the Budget’s impact will still continue to hold the markets high,” sitharaman added.

Also Read:“Investor Confidence Continues”: Nirmala Sitharaman On Adani Group Row

The Finance Minister further said the banking sector’s position is “comfortable” right now. “…having gone through the twin balance sheet problem, the Indian banking sector today is at a comfortable level. With their NPAs coming down to absolutely low levels, recoveries happening, and their position is very sound which gets reflected in the fact that when they go to raise monies in the market, they are absolutely comfortable raising monies as well.”

Responding to media reports expressing concern about the exposures of banks to a business conglomerate, the Reserve Bank of India, did not name Adani, but said, as per its assessment, “the banking sector remains resilient and stable.” Banks are also in compliance with the Large Exposure Framework guidelines issued by the RBI, it said.

A senior finance ministry official said, the Adani Group did not yet fall in the “too big to fail” category. The official, however, said that given the upheaval in the shares of the Adani Group companies and the progress of its flagship Adani Enterprises Ltd’s Rs 20,000 crore follow-on public offer, the Securities and Exchange Board of India should have intervened.

The official, however, said the Finance Ministry did not feel the need to tell the regulators to act in one way or the other. “First it is about one company, one group… there was no systemic risk… and it is for the regulators to act on their own should they feel the need so,” the official said, requesting anonymity.

“The exposure of LIC towards Adani Group is around 1 percent, while for public sector banks is also less than 1 percent. So, the Group cannot be termed as too big to fail, yet… unlike IL&FS, this issue seems more similar to the Satyam incident as the underlying assets are still revenue-earning assets… now, with the recent turn of events, regulators will be more alert on such an issue…regulators such as SEBI should have stepped in earlier.”

The country’s largest lender State Bank of India (SBI) on Friday said the total outstanding exposure of the bank to the Adani Group currently stands at 0.9 percent, or Rs 27,000 crore, of the total loan book.

“As far as the quantum (of loans to the Adani Group) is concerned, that is about 0.8-0.9 percent of our total loan book.

Our total loan book size is Rs 31 lakh crore (as of end-December 2022), so it (outstanding exposure to the Adani Group) should be Rs 26,000-27,000 crore,” SBI’s Chairman Dinesh Khara said, adding that any fall in the Group’s stock market prices will not have any impact on the loans it has raised from the lender.