SBI says Adani exposure well below RBI limit

Mumbai: The exposure of State Bank of India (SBI) to the Adani Group is well below the central bank's Large Exposure Framework, and is secured by cash-generating assets equipped with adequate escrow mechanisms that guarantee on-time debt servicing, a top executive at the country's biggest lender said, even as concerns over advances to the infrastructure conglomerate roiled banking stocks.

"While as a matter of policy we don't comment on individual clients, in the interest of setting the context right, we wish to clarify that SBI's exposure to Adani group is well below the Large Exposure Framework," said SBI's managing director in charge of corporate banking and subsidiaries, Swaminathan J. "All exposure to the group from SBI is secured by cash generating assets with adequate escrow mechanism in place, hence debt service will not be a challenge."

The central bank's Large Exposure Framework limits the total exposure of a single bank to a particular corporate group at 25% of the bank's Tier 1 capital base.

Swaminathan further added that the Adani Group's exposure to the Indian banking system, as a percentage of its total debt, has been declining over the last two to three years.

"In the same period, its debt to EBITDA (earnings before depreciation interest and tax) also has been getting better, which helps the group to service its obligations comfortably," he said.

After US activist short-seller Hindenburg Research accused the Adani Group of price 'manipulation' and governance lapses in a report on January 24, the listed entities of the conglomerate have lost nearly $50 billion in market value in two days of trading. Banking stocks have been at the vanguard of the losses in the broader market, with three stocks led by SBI making up the list of top losers Friday on the Nifty.