‘Not in panic mode yet, but watch out’, major banks respond to Hindenburg on Adani

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Day after finished $4 lakh crore was laundered from Adani’s account with a ripple effect on bank stocks over allegations made by US short seller Hindenburg Research. India’s major banks say they are watching, but say there is nothing alarming as of now.

Major public sector banks said on Friday that their exposure to the Adani Group was within limits prescribed by the central bank, assuaging fears of default risks from their exposure to the conglomerate. The Reserve Bank of India allows no more than 25% of a bank’s available eligible capital base to be exposed to any group of connected companies.

The benchmark Sensex and Nifty indices slumped more than 1 percent to close at three-month lows on Friday as selling in banking, financial, utility and oil stocks sparked by an unfavorable report on the Adani group, as well as the FIIs that took a cautious stance ahead of the union budget. This resulted in a loss of $Investor wealth of 7.67 lakh cr is being lost due to panic selling.

Key stocks in the ports-to-power conglomerate, led by Gautam Adani, lost 20% with 6 in 10 stocks trading lower. His follow-up offer of 20,000 cr also received a very moderate response.

Public sector banks in India have been hit in the past by massive corporate defaults. Since then, lenders have taken various steps to clean up their books, but any new default by a large company could hit its balance sheet.

“There is nothing alarming about our exposure to Adani and we don’t have any concerns as of now,” Dinesh Kumar Khara, chairman of the State Bank of India, the country’s largest lender, told Reuters. The chairman confirmed that the group has not raised any financing from SBI recently, however the bank will be “prudent” with such requests in the future. The company has been contacted for clarification and the board will make any decision on the bank’s exposure to the group only after that, Reuters quoted an official as saying.

An official at the state-run Bank of India added that the lender’s loans to the Adani group were within permissible limits, while executives at two other private lenders said they were not yet in “panic mode” but rather they were attentive.

“Our exposure to the Adani Group is below the Reserve Bank of India’s large exposure framework,” a Bank of India official said on condition of anonymity as the details were private.

“Until last month, the interest payments on the Adani Group loans have been intact.”

Union Bank of India was also not experiencing any stress from its exposure to the conglomerate, said a bank official, who also spoke on condition of anonymity as the matter was private.

The Adani Group comprises the flagship Adani Enterprises Ltd, as well as Adani Ports and Special Economic Zone Ltd, Adani Power Ltd, Adani Green Energy Ltd and Adani Transmission Ltd.

According to Jefferies, the group’s debt represents 0.5% of total loans in the Indian banking sector. For public sector banks, debt is 0.7% of total loans and for private banks it is 0.3%.

“We are waiting for more explanations from them and each bank will have to take a call depending on the type of exposure they have in Adani,” said a senior executive at a private bank, who did not want to be named because he was not authorized. to speak to the media, he said he.

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