Bombay:
Bank of Baroda, a public sector lender, said Friday it has reduced exposure to Adani Group entities over the past two years and is not concerned about the conglomerate’s asset quality issues.
The bank’s general manager and CEO, Sanjiv Chadha, told reporters that the bank’s total exposure to the entities of the port-to-media conglomerate is one-fourth of the exposures per group allowed under the Large Exposures Framework ( LEF), but declined to share some.
In the LEF, RBI says that all a bank’s exposure values to a group of member counterparties cannot exceed 25 percent of the bank’s available eligible capital at all times.
Without disclosing the size of the investments, Mr. Chadha said that 30 percent of the bank’s total exposure to Adani group companies is in entities that have a joint venture with state-owned companies or that the exposure is backed by a guarantee from government-owned entities. He said overall exposure has decreased as a percentage of the balance over the past two years.
Responding to a specific question about Adani Group’s exposures, the bank’s MD and CEO said there are “absolutely no concerns” from an asset quality standpoint, nor is there any request from the group for refinancing.
Things have been tough for the Adani Group over the past week since the release of a report from a short seller claiming it was the biggest scam in the company’s history, indulging in fraudulent transactions and stock price manipulation. The Group was forced to cancel a Rs 20,000 crore share sale a day after the issue was scrapped due to the continued sharp fall in share prices.
Amid the drop in share prices of the listed entities of the Adani Group – the flagship company plummeted 20 per cent on Friday’s opening – Mr Chadha explained that banks do not issue corporate loans based on share prices, but on book value and assets as collateral.
In addition, most loans to corporate entities are secured and working capital loans, which make up a large portion of exposure to corporate entities, are backed by cash flows. Mr Chadha said the bank’s corporate lending performed extremely well, pointing out that the slippage amounted to just Rs 13 crore for the December quarter, compared to thousands of crores the banks previously reported.
Advances that have gone unpaid for more than 30 days are also low: just 0.4 percent of the total corporate portfolio, which amounts to nearly 44 percent of the total domestic loan portfolio.
The bank reported an increase of 75.4 percent in December’s net quarter at Rs 3,853 crore. The BoB scrip closed 6.20 percent higher at Rs 163.65 a piece on the BSE against a gain of 1.52 percent on the benchmark.
(This story has not been edited by DailyExpertNews staff and is auto-generated from a syndicated feed.)
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