Editor's Pick: Banking sector stable, says RBI, as Adani shares plummet

The Reserve Bank of India (RBI) on Friday said as per its current assessment, the banking sector remained resilient and stable. “Various parameters relating to capital adequacy, asset quality, liquidity, provision coverage and profitability are healthy,” the central bank said in a statement on the health of the Indian banking sector. “Banks are also in compliance with the Large Exposure Framework (LEF) guidelines issued by the RBI,” it added, explaining that it was making the statement in the backdrop of media reports expressing concern about the exposures of Indian banks to a business conglomerate. While the RBI did not name the conglomerate, the recent rout in Adani Group shares and the group’s decision to withdraw a ₹20,000 crore follow-on public offer a day after it had been fully subscribed, has triggered widespread concern about the group’s level of indebtedness and its ability to meet its debt obligations. “The RBI remains vigilant and continues to monitor the stability of the Indian banking sector,” it said. “As the regulator and supervisor, the RBI maintains a constant vigil… on individual banks with a view to maintain financial stability,” it said. “The RBI has a Central Repository of Information on Large Credits (CRILC) database system where the banks report their exposure of ₹5 crore and above which is used for monitoring purposes,” it added. As on December 31, 2022, the State Bank of India’s total exposure to the Adani Group was ₹27,000 crore, SBI chairman Dinesh Khara said on Friday, adding the bank saw no concern “as of now” over the group’s level of debt. “This is 0.88% of our total [₹31 lakh crore] loan book,” Mr. Khara said, adding, “we do not envisage them [Adani Group] facing any challenges to servicing their debt obligations.” Asked about the bank’s approach to lend further to new projects of the group, he said, “For project [loan] sanction, they have to bring their equity. That will be insisted upon, else it will not be sanctioned. Going forward, each of the proposals will be evaluated on merit and everybody will be mindful about the situation,” he said. On Friday, the markets rebounded after weeks of volatility following the Hindenburg Research report on January 24, which accused the Adani Group of stock manipulation and accounting fraud. The Sensex rose 909 points, or 1.52 % to finish at 60,842 following a rebound in bank shares and a recovery in some Adani Group stocks. But the Adani Group, which has lost ₹9.1 lakh crore in market capitalisation since the Hindenburg Research came out, saw six of its 10 group stocks extending losses With the Opposition digging its heels in Parliament on an investigation into business practices of the group, and the Adani Group invested in several sectors across the economy, this story becomes an important one. The Hindu’s Editorials Going green: On Budget 2023’s and India’s net-zero commitment Reign of terror: On the two years since the Myanmar coup The Hindu’s Daily News Quiz Which country announced the removal of the British monarchy from its banknotes? Cayman Islands Australia New Zealand Kiribati To know the answer and to play the full quiz, click here. [logo] Editor's Pick 04 FEBRUARY 2023 [The Hindu logo] In the Editor's Pick newsletter, The Hindu explains why a story was important enough to be carried on the front page of today's edition of our newspaper. [Arrow]( [Open in browser]( [Mail icon]( [More newsletters]( Banking sector stable, says RBI, as Adani shares plummet The Reserve Bank of India (RBI) on Friday said as per its current assessment, the [banking sector remained resilient and stable](. “Various parameters relating to capital adequacy, asset quality, liquidity, provision coverage and profitability are healthy,” the central bank said in a statement on the health of the Indian banking sector. “Banks are also in compliance with the Large Exposure Framework (LEF) guidelines issued by the RBI,” it added, explaining that it was making the statement in the backdrop of media reports expressing concern about the exposures of Indian banks to a business conglomerate. While the RBI did not name the conglomerate, the recent rout in Adani Group shares and the [group’s decision to withdraw a ₹20,000 crore follow-on public offer]( a day after it had been fully subscribed, has triggered widespread concern about the group’s level of indebtedness and its ability to meet its debt obligations. “The RBI remains vigilant and continues to monitor the stability of the Indian banking sector,” it said. “As the regulator and supervisor, the RBI maintains a constant vigil… on individual banks with a view to maintain financial stability,” it said. “The RBI has a Central Repository of Information on Large Credits (CRILC) database system where the banks report their exposure of ₹5 crore and above which is used for monitoring purposes,” it added.  As on December 31, 2022, the [State Bank of India’s total exposure]( to the Adani Group was ₹27,000 crore, SBI chairman Dinesh Khara said on Friday, adding the bank saw no concern “as of now” over the group’s level of debt.  “This is 0.88% of our total [₹31 lakh crore] loan book,” Mr. Khara said, adding, “we do not envisage them [Adani Group] facing any challenges to servicing their debt obligations.” Asked about the bank’s approach to lend further to new projects of the group, he said, “For project [loan] sanction, they have to bring their equity. That will be insisted upon, else it will not be sanctioned. Going forward, each of the proposals will be evaluated on merit and everybody will be mindful about the situation,” he said. On Friday, the markets rebounded after weeks of volatility following the [Hindenburg Research report]( January 24, which accused the Adani Group of stock manipulation and accounting fraud. The Sensex rose 909 points, or 1.52 % to finish at 60,842 following a rebound in [bank shares and a recovery]( in some Adani Group stocks. But the Adani Group, [which has lost ₹9.1 lakh crore in market capitalisation]( since the Hindenburg Research came out, saw six of its 10 group stocks extending losses With the [Opposition digging its heels]( in Parliament on an investigation into business practices of the group, and the Adani Group invested in several sectors across the economy, this story becomes an important one.  The Hindu’s Editorials [Arrow][Going green: On Budget 2023’s and India’s net-zero commitment]( [Arrow][Reign of terror: On the two years since the Myanmar coup]( The Hindu’s Daily News Quiz Which country announced the removal of the British monarchy from its banknotes? - Cayman Islands - Australia - New Zealand - Kiribati To know the answer and to play the full quiz, [click here](. Are you a book lover looking for your next literary adventure? 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