Indian lenders, including the State Bank of India (SBI), are re-evaluating their financial exposure to the Adani Group following allegations of bribery against the conglomerate’s Chairman, Gautam Adani, by U.S. authorities. This reassessment is seen as a cautious move to reinforce due diligence and scrutinize future loan approvals to the group, according to eight bankers familiar with the matter.
Other banks such as Bank of India, Union Bank of India, ICICI Bank, Canara Bank, IDBI Bank, and RBL Bank, which collectively hold smaller stakes in the group’s financing, are conducting similar internal reviews. However, this exercise does not necessarily indicate any immediate change in their credit strategies toward the group.
A regulatory source knowledgeable about the developments emphasized that the banking system does not face a dire threat due to the allegations. “From a systemic perspective, there is no need to panic. No entity is overexposed to the Adani Group,” the source stated, pointing to the diversified nature of Indian lenders’ portfolios.
Nevertheless, the revelations have compelled banks to ensure that their existing due diligence and monitoring mechanisms align with any potential reputational risks. This comes as the conglomerate navigates the fallout of heightened global scrutiny.
The Reserve Bank of India (RBI), the country’s central banking institution, has not commented on the situation. Queries sent via email to the RBI, SBI, the Adani Group, and the other lenders seeking statements on the matter went unanswered as of the publication of this article.
SBI, India’s largest lender, has the most substantial exposure to the Adani Group, with sanctioned loans amounting to ₹338 billion (approximately $4 billion), as per estimates by IIFL Securities. Despite its significant stake, SBI officials noted that the bank would not halt lending to ongoing Adani projects that are nearing completion.
“These projects have already been vetted, and any pause at this stage could affect their completion timelines. However, we will ensure that disbursements adhere strictly to compliance requirements,” said a source aware of the developments.
The bank has decided to adopt a cautious stance on new funding proposals, particularly for projects at an early stage. SBI officials are likely to impose stricter scrutiny to ensure the group adheres to agreed-upon conditions.
Other lenders, including public and private sector players with comparatively lower exposure to the Adani Group, are also reviewing their current loan portfolios. This includes a comprehensive assessment of risk management protocols, particularly for new financial requests.
While the exact nature of these reviews remains undisclosed, sources confirmed that the banks aim to mitigate risks without creating disruptions in their relationship with the conglomerate. These institutions may also analyze whether potential reputational risks could warrant changes in their operational approach.
The U.S. allegations against Gautam Adani have emerged at a critical time for the group, which has been under international scrutiny since the publication of a damning report by Hindenburg Research earlier in the year. The report accused the Adani Group of stock manipulation, accounting irregularities, and financial mismanagement. Although the group has denied these allegations, the fallout has raised questions about its corporate governance and financial practices.
The latest bribery allegations against Gautam Adani have added to these challenges, prompting a fresh wave of scrutiny from both domestic and international stakeholders.
Banking sources confirmed that the ongoing reviews would primarily focus on ensuring compliance with existing terms and conditions, examining the financial health of ongoing Adani projects, and scrutinizing the group’s ability to meet debt obligations.
- Existing Loan Monitoring: Detailed evaluations of the group’s ongoing projects and adherence to payment schedules.
- New Lending Proposals: Enhanced scrutiny for fresh financial requests, with a focus on regulatory compliance and project feasibility.
- Reputation Risk Analysis: Assessing the broader implications of continued associations with the group amid global attention.
These reviews are in line with standard practices but reflect heightened caution due to recent developments.
Despite these precautionary measures, Indian banks remain optimistic about the stability of the financial system. The diversified portfolios of these banks, coupled with the Adani Group’s robust repayment record so far, provide some assurance.
“Indian banks are well-capitalized, and their overall exposure to the Adani Group is within manageable limits,” a banking official noted.
The Adani Group, one of India’s largest business conglomerates, has interests spanning infrastructure, energy, ports, and logistics. It has relied on a mix of domestic and international financing to fuel its expansion over the past decade.
While the group has consistently defended its financial practices, the cascading allegations have made it more challenging to secure fresh capital in a market where trust is paramount.
Earlier this year, after the Hindenburg report surfaced, the group had sought to reassure investors and lenders about its financial health by prepaying loans and publicly sharing its debt-reduction plans. These efforts had temporarily assuaged concerns, but the new bribery allegations risk undoing that progress.
