LIC's debt exposure to Adani firms stands at Rs 6,183 crore as of March 5, 2023: FM tells LS

State-owned Life Insurance Corporation's (LIC) outstanding debt exposure in Adani Group of companies declined from Rs 6,347 crore at the end of 2022 to Rs 6,183 crore on March 5, 2023, government data tabled in Parliament showed on Monday. 

"The Life Insurance Corporation of India has informed the government that its debt exposure to Adani Group firms was Rs 6,347 crore and Rs 6,183 crore, as on December 31, 2022 and March 5, 2023, respectively," Finance Minister Nirmala Sitharaman told Lok Sabha in a written reply. LIC's outstanding debt in Adani Ports & Special Economic Zone Ltd stands at Rs 5,388.6 crore as of March 5, 2023 as against Rs 5,553 crore on December 31, 2022 . On Saturday, government decided not to extend the term of LIC chairman M R Kumar.

Five public sector general insurance companies have informed that these companies do not have loan/credit exposure to Adani firms, said the minister.

LIC's investments in Adani firms have come under intense scrutiny ever since the conglomerate's listed stocks fell over 50% due to allegations of fraud made against it by US short seller Hindenburg Research. 

The minister also responded to a question on whether various banks have assessed the risks involved in recovery of loans/credit exposure to Adani Group firms.

"Public sector banks 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," the minister said in her reply. 

She also explained the framework that has been put in place by Reserve Bank of India to protect banks from risk. 

"As per inputs received from RBI, in order 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 per cent (extendable to 25 per cent by the Board of the bank under exceptional circumstances) and 25 per cent, respectively, of the eligible capital base of the bank.

"Also, as per RBI guidelines, banks are required to have a clear policy regarding the Debt-Equity Ratio 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 overall aggregate sanction credit limit of Rs 10,000 crore," FM Sitharaman said in her reply. 

Adani Group had attacked Hindenburg as "an unethical short seller" and stated that the report by the New York-based entity was "nothing but a lie". The continued sell-off in Adani Group stocks led its flagship firm, Adani Enterprises Limited, to cancel a fully subscribed Rs 20,000-crore follow-on public offer.

Meanwhile, the Supreme Court set up an expert committee and directed markets regulator SEBI to investigate whether there was any manipulation of Adani stock prices. Supreme Court directed SEBI to conduct an investigation within two months and submit a status report. The committee will consist of six members, headed by former apex court judge Justice AM Sapre. The apex court was hearing petitions pertaining to the Hindenburg report, including on the constitution of a committee relating to regulatory mechanisms to protect investors' interest.