RBI: Banks' exposure to Adani group not significant, exposure to shares is insignificant

During the RBI’s post credit policy press conference, the RBI governor addressed the controversy surrounding the Adani group.

Responding to a specific question on the banking & NBFC industry’s exposure to Adani group stocks, the governor reiterated the resilience of the Indian banking sector.

Without naming the Adani group, he said, “The Indian banking sector, including the NBFC sector continue to be resilient and strong”. The governor went on to outline several steps taken by the RBI to regulate governance of banks. He said, “In the last 3-4 years, RBI has taken a number of steps to strengthen the resilience of Indian banks. We have issued guidelines about the functioning of audit committees, for functioning of the risk management committees. We have now made it mandatory for the appointment of a Chief risk officer and a chief compliance officer in banks. We have also rationalised the large exposure norms in the past few years.”

Responding to another question, Governor Das said that RBI has carried out its own assessment and that the large exposure guidelines by the central bank are fully complied with. “The strength, size and resilience of the Indian banking system is much larger and much stronger to be affected by an individual incident or a case like this". The governor went on to say that this perception was because of the market capitalisation of the group. However, when banks lend money to a company, it is not based on market cap but on things like fundamentals of the company, anticipated cash flows etc.

Adding the what the Governor said, Deputy governor M.K Jain, said that the exposure of banks and NBFCs to the Adani group is not very significant. He also termed the exposure against shares as ‘‘insignificant’’.

On Friday, The Reserve Bank of India issued a statement saying that as per its current assessment, the banking sector remains resilient and stable. RBI says “there have been concerns over exposure of banks to a business conglomerate.” The statement goes on to say that the RBI maintains a constant vigil and continues to monitor the banking sector.