The Reserve Bank of India (RBI) is keeping a close watch on the top 20 business houses that have the largest borrowings from banks to identify risks in advance, said people with knowledge of the matter.
This increased vigilance is in addition to the routine monitoring of systemically important financial intermediaries and the Central Repository of Information on Large Credits (CRILC).
The RBI, also the banking sector regulator, is closely monitoring profitability and other financial performance measures of these conglomerates and their companies besides parameters such as the quantum of debt raised from other sources like external commercial borrowings or bonds for any signs of stress.
“A monitoring system was put in place to catch any build-up of stress so that preventive steps can be taken to prevent its transmission to banks’ balance sheets in the future,” said one of the persons cited. The central bank is keen to deepen supervision.
It wants to identify any debt-servicing issues so that preventive measures can be undertaken swiftly.
“A deep dive is undertaken into the data and information available to study their business models and loan portfolio along with various performance parameters,” the person added.
The gross non-performing assets (NPAs) of all scheduled commercial banks dropped to 5.8% of gross advances at the end of March 2022 from 11.2% at the end of March 2018.
The banking regulator had swiftly issued a statement after US-based short-seller Hindenburg Research made several allegations against the Adani Group in a report on January 25.
“There have been media reports expressing concern about the exposures of Indian banks to a business conglomerate,” the RBI said in a statement on February 3, adding that the banking sector remains resilient and stable. “As the regulator and supervisor, the RBI maintains a constant vigil on the banking sector and on individual banks with a view to maintain financial stability.
The RBI has a Central Repository of Information on Large Credits database system where the banks report their exposure of Rs 5 crore and above which is used for monitoring purposes.” The Adani Group has denied the allegations.
The banking regulator had in 2019 set up a separate vertical for supervision and regulation to improve oversight for banks and non-banking finance companies (NBFCs) after a series of bank frauds as well as the IL&FS default.
It also put in place a Platform for Regulated Entities for Integrated Supervision and Monitoring, which is a web-based end-to-end workflow automation system aimed at strengthening compliance of supervised entities (SEs).
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