The Indian banking system is too resilient and large to be impacted by a single case, the Reserve Bank of India (RBI) said on Wednesday, adding that the exposure of domestic banks to the Adani Group is “not very significant” and won’t have much of an impact.
RBI Deputy Governor MK Jain, in response to a question on whether the central bank will issue any guidance to lenders on their exposures to the Adani group, given certain flags raised by rating agencies, said that domestic banks’ exposures are “not very significant” and termed the exposures against shares as “insignificant”.
MK Jain observed that domestic banks’ exposure is not based on market capitalization but is against the underlying assets, the operating cash flows and the projects under implementation.
RBI Governor Shaktikanta Das said that after reviewing their large exposure guidelines, which cap exposures to a single company or a group, are fully complied with by all the lenders, as per RBI’s internal assessments.
Das stressed that the strength, the size and the resilience of the Indian banking system now are much stronger and larger to be affected by an individual incident or a case like this.
Das clarified that a bank’s lending calls are not done on the market capitalisation of a company, but take into account the fundamentals of a company, the cash flows expected and other factors that come up in an appraisal process.
Read Also: Mehbooba Mufti detained during protest against Jammu and Kashmir anti-encroachment drive in Delhi | WATCH
The RBI chief assured that India’s banking system continues to be strong and stable.
Replying to a question if the RBI will ask banks to up the standard asset provisioning at the group, Shaktikanta Das said Indian banks are very prudent, and the individual bank management will take their own decisions on whether to set aside additional money.
Das pointed out that the loan appraisal process at banks has also undergone improvements over the last few years, and listed out the steps taken to improve the governance and resilience of banks.
These, he said, include guidelines on governance, audit committees, risk management committees and making it mandatory to appoint chief risk officers and chief compliance officers.
Adani Group has endured over $120 billion in market losses- nearly half of the conglomerate’s estimated value—since the damning report released by US short-seller Hindenburg Research last month.
Hindenburg Research published a report last month, accusing the Adani Group of indulging in improper use of offshore tax havens and stock manipulation while also raising concerns about high debt and the valuations of seven listed Adani companies.
Congress chief Mallikarjun Kharge questions PM Modi’s silence on spreading hatred in country, calls him mouni baba
Congress chief Mallikarjun Kharge questions PM Modi’s silence on spreading hatred in country, calls him mouni baba