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Banks Lend On Fundamentals, Not Market Cap, Says RBI Governor On Adani Exposure

Appraisal methods of Indian banks have significantly improved and continue to be resilient, says RBI Governor Shaktikanta Das.

<div class="paragraphs"><p>A Reserve Bank of India RBI signage. (Photo: Vijay Sartape/ Source BQ Prime)</p></div>
A Reserve Bank of India RBI signage. (Photo: Vijay Sartape/ Source BQ Prime)

Banks lend to a company on the basis of its fundamentals and strength, not its market capitalisation, said RBI Governor Shaktikanta Das, responding to a question on the exposure of banks to the Adani Group.

The appraisal methods of Indian banks have significantly improved and the sector continues to be resilient, Das said in a press conference after announcing the monetary policy. But individual cases and their numbers are not discussed in the public domain, he said.

In a rare clarification last week, the central bank said the health of the banking sector due to exposure to a "business conglomerate". It had said that the banking system "remains resilient and stable" according to its own assessment.

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Shares of Adani Group companies had tumbled after international short-seller Hindenburg Research leveled governance allegations. While the Adani Group rejected the allegations, the selloff continued, only to ease this week.

Lenders such as State Bank of India, Bank of Baroda, Life Insurance Corp., IndusInd Bank Ltd., and IDFC First Bank Ltd. also issued clarifications on the quality of their exposure.

Credit agencies such as Fitch Ratings and Moody's Investors Service said their ratings on Adani Group entities remained unchanged, while the group's joint venture partners such as TotalEnergies and Wilmar International and investors such as Abu Dhabi's IHC reaffirmed commitments.