The Reserve Bank of India (RBI) said on Wednesday the strength, size, and resilience of the Indian banking system now are much stronger and larger to be affected by an individual incident or a case.

Hindenburg Research published a report last month, accusing the Adani Group of indulging in an improper use of offshore tax havens and stock manipulation while also raising concerns about high debt and the valuations of seven listed Adani companies. Adani Group has endured over $120 billion in market losses.

The RBI chief assured that India’s banking system continues to be strong and stable. RBI Governor Shaktikanta Das said that after reviewing their large exposure guidelines, which cap exposures to a single company or a group, are fully complied with by all the lenders, as per RBI’s internal assessments.

RBI Governor clarified that a bank’s lending calls are not done on the market capitalization of a company, but take into account the fundamentals of a company, the cash flows expected, and other factors that come up in an appraisal process.

RBI Deputy Governor MK Jain, in response to a question on whether the central bank will issue any guidance to lenders on their exposures to the Adani group, given certain flags raised by rating agencies, said that domestic banks’ exposures are ‘not very significant’ and termed the exposures against shares as ‘insignificant’.

MK Jain observed that domestic banks’ exposure is not based on market capitalization but is against the underlying assets, the operating cash flows, and the projects under implementation.

Governor Das pointed out that the loan appraisal process at banks has also undergone improvements over the last few years, and listed out the steps taken to improve the governance and resilience of banks. These, he said, include guidelines on governance, audit committees, risk management committees, and making it mandatory to appoint chief risk officers and chief compliance officers.

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