New Delhi: Congress leader Jairam Ramesh urged the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) to probe the Adani Group’s debt exposure to prevent a possible collapse of India’s banking system.
Ramesh has been at the forefront of demanding a probe against the Adani Group, which is facing allegations of stock manipulation and fraud.
In a letter to the RBI governor Shaktikanta Das, Ramesh said that the RBI must look into the extent of the Indian banks’ exposure to the group, which the US short-seller firm Hindenburg Research described as “deeply over-leveraged”, and claims the business conglomerate manipulated its stocks through off-shore companies.
Two, he urged the RBI to probe “the explicit and implicit guarantees that the Adani Group has been given” by the Indian banks for a possible bailout in case foreign funding dries up.
“Will the RBI ensure that the Indian banks are not forced to step in to substitute any shortfall in foreign financing, especially given the Adani group’s political connections?” Ramesh asked, pointing out that public sector enterprises like the LIC and SBI have been “unusually generous to the Adani group in recent years”. He said that the RBI must ensure that there are no risks to financial stability by properly investigating the matter.
Both LIC and SBI have said that the exposure is within allowed limits.
He added that the RBI should prevent any cascading effects whatsoever because of a possible fall in the Adani Group’s “ability to secure financing”.
“As a steward of the financial system, the RBI must do everything possible to protect India’s banks and financial institutions, and we urge you to act in the national interest to ensure that India’s taxpayers do not pay the price for the misgovernance and potential illegalities of one influential business house,” Ramesh wrote in his letter to the RBI.
In a similar letter to the SEBI chairperson, Ramesh urged that the regulator should investigate all possible violations by the Adani Group to ensure “complete transparency” on all investments made in the conglomerate’s companies.
“Many Indians were disturbed by the allegations that the Adani Group has indulged in ‘brazen stock manipulation’, and ‘accounting fraud’ via a ‘vast labyrinth of offshore shell entities’. Apart from the potential violation of several Indian laws, this goes against everything that the SEBI stands for,” he wrote.
He warned SEBI that given the group’s size and political connections, the regulatory body should ensure that its “investigations are seen as fair and complete, with no favour shown to the influential business group”, and that the failure to do so could affect India’s ability to raise funds globally.
The Congress leader also asked SEBI to look into the heavy investments of PSEs like the LIC and SBI in the Adani Group’s equity when many other private firms resisted doing so because of the concerns raised over “indebtedness and corporate governance” of the business conglomerate. He pointed out that the savings of many Indians who have invested in LIC or SBI have taken a severe fall after the Adani Group’s recent crash in the stock markets, while alleging that the public sector institutions were acting under “pressure from above” to invest in the controversial group.
“The inclusion of Adani Enterprises in the widely used National Stock Exchange Nifty 50 index in September 2022 occurred despite the firm’s weak fundamentals, an excessive price-to-earnings ratio and a tiny free float.
Adding Adani Enterprises compelled supposedly conservative Nifty index funds to make significant purchases of this risky stock, including the Employees Provident Fund Organisation, India’s largest pension fund,” Ramesh said.
“In recent days, global stock indices have suspended Adani Group companies while the matter is investigated, but the NSE has failed to take any similar action to protect investors.
Is it not SEBI’s responsibility to ensure that index investors are protected from investing in questionable firms?” the Rajya Sabha MP asked, as he spoke about SEBI’s responsibility to “increase transparency of financial flows into the country to prevent round-tripping and money laundering” and reduce dependence on offshore tax havens.
Please visit our website London Institute of Peace Research for latest peace news
