No major risk to banks from Adani crisis, says S&P exec

“Some of the banks might get a lot more focussed on their group exposures (as a result of this crisis). Risk premium to certain companies, and (to those) within the Adani umbrella, can rise. And finally, in certain cases where banks have some concerns on governance, they might put in more due diligence (while lending),” Abhishek Dangra, senior director of infrastructure & utilities ratings (South & South East Asia) at S&P, said in a webinar. Any extra due diligence by banks “might impact either the cost or the time lines” of lending to companies, he added.

However, Dangra also pointed at a number of factors to suggest the crisis doesn’t seem to cause meaningful contagion risk to the Indian financial system directly. Based on external estimates, the banking system’s exposure to Adani Group is less than 1%, he said.

The rating of some of the Adani Group entities is “still not at a distress level”. Also, the Reserve Bank of India has “come out and said it has reviewed the group’s exposure to banks and it doesn’t see risks to the stability of the banking system”, he said.

Adani Group firms have witnessed a market rout following a series of allegations, including of stock manipulation, labelled by US short-seller Hindenburg Research against the conglomerate. Adani Group has strongly refuted the allegations.

The seven listed firms of the group have lost more than $100 billion in market capitalisation since the release of Hindenburg Research’s paper on January 24.

The government on Monday agreed to the Supreme Court’s suggestion to set up a high-powered committee to review the existing investor protection regime while emphasising that the Securities and Exchange Board of India (Sebi) and other agencies are competent enough to deal with stock market issues.