Banks’ exposure to Adani group not large to affect credit quality: Global rating agencies

New Delhi: Soon after Centre dispatched its 1st batch of relief material to Turkey, the country’s Ambassador to India Firat Sunel referred to New Delhi as ‘A friend in need is a friend indeed’.

“We appreciate quick and prompt response from India since it’s matter of life and death,” he said. PM Narendra Modi also turned emotional and recalled 2001 Bhuj earthquake that claimed thousands of lives.

First India Bureau New Delhi: Global rating agencies Fitch and Moody’s on Tuesday said banks’ exposure to Adani group is not large enough to affect their credit quality, and bank ratings are driven by expectations that they would receive ‘extraordinary’ sovereign support, if needed.

“Fitch Ratings believes that Indian banks’ exposure to the Adani group is insufficient in itself to present a substantial risk to the banks’ standalone credit profiles,” the rating agency said in a note.

Moody’s stated that although the exposures to Adani group are larger for public sector banks than for private sector banks, they are smaller than 1 per cent of total loans for most banks. “Risks for banks can increase if Adani becomes more reli ant on bank loans,” Moody’s said.

However, the group’s access to funding from inter national markets can be curtailed be cause of heightened risk percep tion.

“Yet the overall quality of Indian banks’ corporate loans will be stable,” Moody’s said. “Corporates in general have deleveraged in the past few years. This is reflected in modest growth in their corporate loan books. Further, banks’ un-

Fitch Ratings believes that Indian banks’ exposure to the Adani group is insufficient to present a substantial risk to banks’ standalone credit profiles driven by expectations that the banks would receive extraordinary sovereign support, if needed. US-based activist short-seller Hindenburg Research in a report dated January 24 made a litany of allegations, including fraud- ulent transactions and share price manipulation at the Gautam Adani-led group.

Adani group has dismissed charges as lies, saying it complies with all laws and disclosure requirements. Opposition, however, has been calling it a big fraud.

“We currently believe the economic and sovereign implications of the Adani controversy remain limited. However, there is a tail risk that fallout from the controversy could broaden and influence India’s sovereign rating, with knock-on effects for bank IDRs,” Fitch said.