RBI Governor says Indian banks to remain strong

The Reserve Bank of India RBI Governor Shaktikanta Das said on Wednesday that India's banking sector, including NBFCs, continues to be strong and is not likely to be affected by an individual incident or case.

In response to a query on Indian banks exposure to Adani Group, Das said that RBI has made an assessment of the lenders exposure to Adani Group. He said that large exposure guidelines have been complied with by all banks.

Adani Group slipped into probably the worst crisis in its history after US short-seller Hindenburg Research accused the conglomerate of brazen stock manipulation, money laundering and accounting fraud scheme over the course of decades. Short seller claimed that the report was summed up after a two-year investigation.

The RBI had been in touch with banks about their exposure to the group after this.

In a press conference after the RBI policy announcements, Das stated that banks do not lend on the basis of market capitalisation of a company.

When banks lend money to companies, it is not on the basis of market capitalisation of that particular company. He said that they lend on the basis of strength, fundamentals, cash flows, and other factors.

The exposure of Indian banks to the embattled Adani Group is not enough to affect their credit profiles, two rating agencies said on Tuesday.

The exposure of Indian banks to Adani Group is insufficient in itself to present a significant risk to the credit profiles of these lenders, Fitch Ratings said in a note.

Fitch estimated that loans to all Adani Group entities account for 0.8% -- 1.2% of total lending for Indian banks rated by the agency, equivalent to 7% -- 13% of total equity.

Moody's Investors Service made similar comments, saying the exposures are larger for public sector banks than private sector banks, but they are smaller than 1% of total loans for most banks.