Debt exposure of Life Insurance Corporation of India (LIC) to Adani group of companies has come down to Rs6,182.64 crore as of 5 March 2023 from Rs6,347.32 crore as of 31 December 2022, the Lok Sabha was informed.
In a written reply, finance minister (FM) Nirmala Sitharaman says that apart from LIC, none of the five public sector general insurance companies has any loan or credit exposure to the Adani group of companies.
Data shared by the minister shows Adani group's six companies have borrowed money from LIC. It includes Adani Ports and SEZ Ltd, Adani Power (Mundra) Ltd, Adani Power Maharashtra Ltd.- Phase I, Adani Power Maharashtra Ltd.- Phase III, Raigarh Energy Generation Ltd and Raipur Energen Ltd.
However, except Adani Ports and SEZ, no other company has repaid the debt. During the past three months till 5 March 2023, Adani Ports and SEZ repaid Rs164.67 crore to LIC, bringing down its outstanding to Rs5,388.60 crore as of 5 March 2023 from Rs5,553.27 crore as on December 2022.
Adani Power (Mundra) has an outstanding of Rs266.46 crore, Adani Power Maharashtra Phase I at Rs81.60 crore, Adani Power Maharashtra - Phase III (Rs254.87 crore), Raigarh Energy Generation (Rs45.44 crore), while Raipur Energen has to repay Rs145.67 crore loan to LIC, data shared by the government in the lower house shows.
Deepak Baij, a member of Parliament (MP) has asked details of loan and credit exposures of public sector banks (PSBs) and insurance companies to Adani group. He also asked whether various banks have assessed the risks involved in recovery of loans and credit exposure to Adani group of companies which have eroded their net assets and market cap substantially during the current year.
In her reply, the FM says, "PSBs have informed that loans are sanctioned after assessing the viability of projects, prospective cash flows, risk factors and availability of adequate security and repayment of loans are ensured by the revenue generated by the project and not by the market capitalisation of the company."
As per inputs received from Reserve Bank of India (RBI), to protect banks from risk, it has implemented large exposure framework which limits the exposures that a bank can take to a single counterparty and a group of connected counterparties to 20%, extendable to 25% by the board of the bank under exceptional circumstances, and 25%, respectively, of the eligible capital base of the bank, the minister says.
According to RBI guidelines, banks are required to have a clear policy regarding the debt-equity ratio (DER) for project financing to ensure that promoters bring in equity funds proportionate to bank finance.
"To address the concentration risk emanating from large exposure to banking system, RBI has stipulated banks to maintain additional provisions and additional risk-weights on the incremental exposures towards specified borrowers having an overall aggregate sanction credit limit of Rs10,000 crore," FM Sitharaman says.
Besides the debt to Adani group companies, LIC owns a stake in seven companies - Adani Enterprises Ltd, Adani Ports & SEZ, Adani Total Gas Ltd, Adani Transmission Ltd, Adani Green Energy Ltd, ACC Ltd and Ambuja Cement Ltd.