Kotak Bank cites “small exposure” to Adani

Kotak Mahindra Bank, a private sector lender in India, has a “small exposure” to the Adani Group, according to a senior official. Paritosh Kashyap, the president and head of wholesale banking at Kotak Mahindra Bank, said that their exposure to the group is in line with their credit philosophy and the size of their balance sheet. He also stated that the issues surrounding the Adani Group are more of a “capital market and valuations issue” rather than a credit issue.

A report by US short-seller had previously referred to Adani as the biggest con in corporate history and had made wide-ranging allegations regarding governance practices and overvalued stocks. This had led to a drop in the Adani group’s listed entities’ value and investors’ initial nervousness regarding banks, fearing a ripple effect on those with exposure to the group.

However, according to experts, Indian banks’ exposures are to operative companies and not against shares at the listed holding company level. The banks are not allowed to lend more than Rs 20 lakh as loans against shares, barring asset buys by infrastructure companies. This has come in as a helpful regulatory mandate for most cases.

The Reserve Bank of India (RBI) has launched a special examination of the banking system’s exposures to Adani Group entities. Governor Shaktikanta Das has said that a single case cannot impact the broader banking system.

The Adani Group issues are not a credit issue for Kotak Mahindra Bank as the operating companies in the group have reasonable leverage, coupled with strong profitability and balance sheets.