MUMBAI: Indian banks’ exposures to Adani Group are not large enough to affect their credit quality materially and the overall quality of the local lenders’ corporate loans will be stable, said Moody’s Investors Service.
Fitch Ratings said that the Indian banks’ exposure to the Adani group is insufficient in itself to present a substantial risk to the banks’ standalone credit profiles. “We estimate that their exposures to Adani are less than 1% of their total loans,” Moody’s said in a report on Tuesday. “We estimate that the bulk of the exposures is collateralised, either with operational assets or with projects under execution, rather than to the corporate level.”
Moody’s says the Adani group’s access to funding from international markets can be curtailed because of heightened risk perception. “In that case, domestic banks may become the main source of funding for the group, resulting in increases in banks’ exposures to Adani and greater risks for them,” the report says.
Yet the overall quality of Indian banks’ corporate loans will be stable, according to Moody’s. “Corporates in general have deleveraged in the past few years. This is reflected in modest growth in their corporate loan books.” Moody’s said that any spillover effects on other corporates would be credit neutral for banks. Fitch said that Indian banks’ Issuer Default Ratings (IDRs) all remain driven by expectations that the banks would receive extraordinary sovereign support if needed.
Amid concerns in certain quarters over LIC’s exposure to Adani Group companies, the government said the insurer has informed that it strictly follows the statutory framework and regulations while making investments.
“LIC has informed that all investments of LIC are carried out strictly as per the statutory framework of the Insurance Act, 1938 and the IRDAI Investment Regulations, 2016 and are guided by a detailed governance mechanism,” Minister of State for Finance Bhagwat Karad told the Rajya Sabha in a written reply on Tuesday.
Last week, state-owned Life Insurance Corporation (LIC) said it has investments of R 35,917.31 crore in Adani Group’s debt and equity securities.