Two top public sector banks have said that their loan exposure to the Adani Group is being serviced regularly and its well within their corporate ceilings.
State Bank of India (SBI) chairman Dinesh Khara said that the bank’s exposure to the Adani Group is 0.88% of its loan book while Bank of Baroda (BoB) CEO Sanjiv Chadha said the bank’s exposure to the group is 1/4th of the large corporate ceiling set by Reserve Bank of India (RBI) norms. Both banks said their loans to the beleaguered group have a good track record and have shown no signs of stress.
“Our lending to the projects of this group are backed by tangible assets and have adequate cash generation. Our total exposure to this group is about 0.88% of our loan book and we see no challenge in servicing of loan obligations. There are no loans against shares and hence there is no impact of the fall in the group’s shares through margin calls,” SBI chairman Khara said in response to questions on the bank’s exposure to the group in a post results conference call.
At the end of the December quarter, SBI’s total loan book stood at Rs 31.33 lakh crore and a 0.88% exposure means the bank had about a Rs 27,000 crore exposure to the group.
Khara said the total exposure included letters of credit and performance based bank guarantees which had no elements of equity which means the bank was insulated from any adverse movements in the group’s stock prices.
“All the loans to this group are evaluated on its merits. But we are always mindful of any risks building up which we do in any normal course. The group has adequate cash generation gor now. If need be we will engage with the group (for any clarifications);” Khara said.
A Jefferies report last week had pegged total Adani Group debt at Rs 1.88 lakh crore, 25% of which was with public sector banks, second only to the bonds which constitute 37% of the group’s debt. SBI due to its sheer size is the top lender to the Adani group but loans to the group make only 0.70% of public sector bank total loans.
BoB CEO Chadha also said the group well within the defined regulatory framework in terms of loans and has shown no signs of stress.
“Our loans to this group are about 1/4th of the large exposurr ceiling of the RBI which includes outstanding plus non funded loans. Infact as a percentage of our balance sheet it has come down. Moreover, 30% of our loans to this group are to joint ventures this group has to public sector companies or secured by a guarantee of a public sector company,” Chadha told reported.
He further elaborated that there have been no issues with regards to loan repayments from the group and the bank’s loans are secured by cash flows that the company has.
“In fact there have been no issues with regards to any large group in the corporate sector let alone this group,” Chadha said.