Amid rising political outrage over the Adani controversy, Reserve Bank Governor Shaktikanta Das on Wednesday said the strength, size and resilience of the Indian banking system is now too strong and large to be affected by such a case.
He said the Reserve Bank of India (RBI) has done its own assessment to come up with the statement on Friday, where it termed the banking sector as strong and resilient.
“The strength, size and resilience of the Indian banking system is now too strong and large to be affected by such a case,” Das said without directly mentioning the Adani group.
His response came on a question whether the RBI would give any guidance to domestic banks about their exposure to Adani group companies in the context of reports by rating agencies on the risk exposure of the group’s banks.
Briefing reporters after the monetary policy announcement, Das said that when banks lend, they base their decision on the fundamentals of a company and the expected cash flows from the projects.
He also clarified that the market capitalization of the company has no role to play in this.
Will Deputy Governor MK Jain
Deputy governor MK Jain said the exposure of domestic banks to the Adani group is “not very significant” and the exposure against stocks is “negligible”.
Meanwhile, Das said there has been a lot of improvement in the methods of evaluating banks over the years.
In the last three-four years, the RBI has taken several steps to strengthen banks’ resilience, including guidelines on governance, audit committees and risk management committees, mandating the appointment of chief risk officers and chief compliance officers.
Concerns have been raised in various quarters about the Adani group companies, including about the risk aversion of lenders to the group, in the wake of an adverse report from US-based short seller Hindenburg Research, which triggered a massive selloff in the shares. Had done companies.
RBI hikes interest rate by 25 bps to 6.5%
The RBI on Wednesday announced a hike in interest rate by 25 bps to 6.5% citing sluggish core inflation. The increase in the repo rate is expected to further increase home, car loan and EMIs. RBI has increased interest rates six times since May 2022 for a total increase of 250 basis points.
Das, who also announced the bi-monthly monetary policy, said the Monetary Policy Committee (MPC) unanimously resolved to hike the policy repo rate by 25 basis points and keep a “strong watch” on the inflation outlook.
Read also: RBI begins monetary policy committee meeting amid expectations of lower rate hikes
Global economic outlook not too bleak: RBI
Meanwhile, the RBI governor also said that the global economic scenario is not looking as dire as it was a few months ago. According to him, growth prospects in major economies have improved, while inflation is on a downward trend.
The RBI governor said, “Real GDP growth for 2023-24 is projected at 7.8% with Q1 at 6.4%, Q2 at 6.2%, Q3 at 6% and Q4 at 5.8%. The Indian economy remains resilient.” In the latest Economic Survey of the Finance Ministry, the growth projection for 2023-24 was 6-6.8%.
(with inputs from agencies)
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