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head of the world Rating agencies Fitch and Moody’s said on Tuesday that loans given by Indian banks to Adani group companies are not high enough to pose any risk to their credit quality. Along with this, both the rating agencies said that bank ratings are set keeping in mind the expectation of extraordinary government support to banks if needed. Adani Group’s shares have fallen sharply after an adverse report from American investment research firm Hindenburg Research came out. Due to this, apprehension has also been raised regarding the loan given to the group of Indian banks.
The effect of the dispute is expected to be widespread
In this context, Fitch Ratings said in one of its comments, “The exposure of Indian banks to the Adani group is not in itself high enough to pose any tangible risk to the banks’ credit profile.” It said that the rating of banks is based on the expectation that they will get extraordinary government support if needed in case of bad loans. “Even in the hypothetical scenario of a substantial portion of the Adani group coming under stress, the credit risk to Indian banks would be manageable and there would be no adverse consequences for the viability ratings of these banks,” Fitch said. Fitch, however, said that there could be some undisclosed non-funded loans belonging to the Adani group. But the rating agency expects such holding to be lower than the disbursed debt. Along with this, Fitch has also warned about such a risk that the effect of this dispute may become widespread and affect India’s reputation.
public sector banks ahead of private banks
Another credit rating agency Moody’s Investor Service said that public sector banks are far ahead of private banks in lending to the Adani group, but Adani group accounts for less than one per cent of total credit disbursements of most banks. Although Moody’s has said that even though the risk to the debt of Indian banks is low, due to the current developments, the Adani group’s funding from the international market may decline. Adani Group has said that a major part of its debt has come from abroad. In this context, Moody’s said, “Banks’ risk exposure may increase if the Adani group becomes more dependent on loans taken from banks.” The rating agency expects the credit quality of Indian banks to corporates to remain stable overall.
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