Srinagar, Feb 03 (PK/By Yasir Shakoor): Jammu and Kashmir Bank is facing scrutiny over its exposure to the Adani Group, which is at the center of a controversy sparked by a report by US-based short seller Hindenburg Research. The bank has a Rs 255 crore ($34 million) exposure to the group, which forms a small portion of the overall Rs 80,000 crore ($10.7 billion) exposure of all Indian banks, but represents a significant sum considering the size of Jammu and Kashmir Bank, accounting for 3% of its revenue.
Details indicate that the loan is a fully drawn down account, with the sanctioned amount and the amount exposed in the Adani Group being the same. This has raised alarm bells among stakeholders and has caused the bank’s share price to fall by 0.5% on Thursday, contributing to an overall fall of nearly 5% in the past 5 days. The bank’s exposure to the Adani Group is higher than other Indian banks such as SBI, PNB, IndusInd Bank or even LIC, which are all less than 1%.
Despite this, J&K Bank’s chairman Baldev Prakash told a local news portal that there is “no cause to worry” and the bank’s Managing Director and CEO made similar comments, declining to comment on the issue further as details are confidential. An anonymous senior bank official confirmed that the loan to the Adani Group is “very recent” and that the loans are secured, with no reason to worry for at least the next few months.
Independent experts have different views on the matter, with some saying that there may not be reasons to worry as of now, but problems could arise in a year or so, while others have said that the loan is now in slightly precarious territory. The bank has set a goal of raising Rs 1,000 crore ($135 million) capital by the end of the current fiscal year to fuel its expansion plans.
The RBI has asked banks to furnish details of their exposure to the Adani Group as on January 31. Other large banks such as SBI and PNB have stated that their exposure to the group is within the limit prescribed by the RBI and is secured by cash generating assets, with adequate trust and retention accounts in place. LIC stated that its exposure to the Adani Group is less than 1% of its total assets under management. The Adani Group has lost $100 billion in market capitalization in the past six trading sessions and its shares have continued to decline on the stock market, with a drop of nearly 23% on Thursday.
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