Amid Adani-Hindenburg controversy, RBI chief says Indian banking system is...
RBI MPC news: The Reserve Bank of India has hiked the policy repo rate by 25 basis points - to 6.5%.
The Indian banking sector, including NBFCs (non-banking financial companies), 'continues to be resilient (and) strong', Reserve Bank of India governor Shaktikanta Das said Wednesday morning, in an apparent reference to concerns over lenders' exposure to the embattled Adani Group.
After Das unveiled the central bank's monetary policy recommendations - including a repo rate hike of 25 basis points - deputy governor MK Jain said domestic banks' exposure was 'against underlying assets, operating cash flows, (and) projects under implementation, and not based on market cap'.
"The strength, size and resilience of the Indian banking system now are much stronger and larger to be affected by a case like this," Das said.
The RBI governor did not name the Adani Group.
Both officials were speaking to reporters after this morning's RBI statement.
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The RBI chief also said banks' appraisal methods had improved over the past few years, and referred to steps taken by the central bank, including framing guidelines and setting up audit and risk management committees.
Das had been asked if the RBI is considering guiding domestic banks regarding exposure to Adani Group stocks in the context of rating agencies' reports. His comments echoed an earlier statement by the RBI.
"... RBI maintains a constant vigil on banking sector… with view to maintaining financial stability', it said, referring to a 'Central Repository of Information on Large Credits' in which banks had to report exposure in excess of ₹5 crore.
Opposition leaders have flagged the 'large exposure' of public financial bodies like the Life Insurance Corporation and the State Bank of India to Adani stocks.
That was after a report by United States-based short-seller Hindenburg Research that accused the Gautam Adani-led conglomerate of 'brazen' accounting fraud and pointed to large debts.
Adani stocks plunged and the group lost well over $100 billion in market value, forcing the cancelling of a $2.5 billion FPO. Some of these stocks have rallied over the past few days, many on the back of loan pre-payment notices.
READ | Eight Adani Group stocks extend gain as traders await earnings reports
Adani issued a detailed response - a 413-page statement - to the Hindenburg report, which it slammed as a 'calculated attack' on India's financial institutions.
The financial furore surrounding Gautam Adani - who tumbled precipitously down a list of the world's richest men after it broke - has also triggered a political row between the ruling Bharatiya Janata Party and the opposition.
READ | Gautam Adani, one of India's most powerful men, suffers a rare defeat
A flashpoint was Congress MP Rahul Gandhi's speech Tuesday in the Lok Sabha, in which he alleged links between the BJP and Adani.
READ | Adani issue roils Parliament as Rahul Gandhi leads charge
The government has distanced itself, pointing to regulatory bodies within the financial sector that would act against any wrong-doing by any company.
Last week union finance minister Nirmala Sitharaman referred to SBI and LIC statements and said their exposure is 'very well within the permitted limits'. The finance minister also said both the LIC and SBI remained over profit even with the valuation (of Adani stocks) falling.
READ | Nirmala Sitharaman on Adani crisis: 'One instance not going to be…'
The LIC and SBI have said their exposure to Adani is within permitted limits.
SBI chairman Dinesh Khara this week said the bank's total exposure is ₹27,000 crore, or 0.88 per cent of its loan book.
LIC last month said its exposure was under ₹42,000 crore (as of September 30, 2022) and that this sum is 0.975% per cent of its AUM at book value.
With input from agencies