Bank of Baroda offers to lend to Adani Group

The Bank of Baroda, a state-run lender in India, has stated that they are open to lending to the Adani Group in the future, as long as the group meets all of the bank’s underwriting criteria. The announcement comes after a period of concern regarding the exposure of various banks to the Adani Group, due to allegations of improper use of offshore tax havens and stock manipulation made by US-based short-seller Hindenburg Research.

To alleviate these concerns, several banks, including the State Bank of India, IndusInd Bank, and Punjab National Bank, have tried to assure the public about their exposure to the Adani Group. The Reserve Bank of India has also said that the Indian banking system remains resilient and stable.

Bank of Baroda’s managing director, Sanjiv Chadha, explained that the bank’s outstanding exposure to the Adani Group was less than one-fourth of the amount permitted by the central bank for conglomerates. This means that the exposure is well within the limit set by the central bank, which allows no more than 25% of a bank’s available eligible capital base to be exposed to any one group of connected companies.

Chadha also noted that a large percentage of the bank’s exposure to the Adani Group was towards companies that have “very strong” cash flows, which limits any potential negative impact on asset quality. He went on to say that Bank of Baroda has top-most underwriting standards as a priority and that there is nothing to be concerned about regarding the bank’s exposure to the Adani Group.

The managing director also stated that Bank of Baroda would assess any refinancing request when it comes up, but that the bank has not taken any in-principle decision to stop lending to the Adani Group. Currently, the bank is comfortable with its exposure to the group and is targeting a loan growth of 18% for this financial year and 15% for 2023-24, mostly from the retail sector.

In the October-December quarter, Bank of Baroda saw growth in retail advances, which increased by 29.4% year-on-year, and in corporate loans, which rose by 13.3%. Domestic deposits also grew by 14.5% in the same period.

Chadha also spoke about funding stressed telecom carrier Vodafone Idea, stating that the bank will evaluate aspects such as the company’s competitive position and the government’s support, among other things. He noted that there was still a long way to go for things to fall into place. The Indian government has allowed Vodafone Idea to convert $2 billion in interest on dues owed to the sovereign into equity. The company will issue 16.13 billion shares at 10 rupees each, worth 161.33 billion rupees.

In conclusion, Bank of Baroda is open to lending to the Adani Group in the future, provided the group meets all of the bank’s underwriting criteria. The bank’s outstanding exposure to the group is well within the limit set by the central bank, and the bank is comfortable with its current exposure. Bank of Baroda is targeting loan growth in the retail sector and is evaluating funding options for stressed telecom carrier Vodafone Idea.