HDFC Bank breaches RBI limits on loans to RIL

However, lender says it has acted totally within regulations; says its board of directors okayed 'the said excess in respect of this exposure'

Leading private sector lender HDFC Bank has “exceeded” the single-borrower limits prescribed by Reserve Bank of India (RBI) in case of its credit exposure to corporate giant Reliance Industries (RIL).

The bank, however, said its board of directors approved “the said excess in respect of this exposure” and it was within the 20 per cent ceiling of capital funds. The central bank has fixed the credit exposure ceiling of a bank at 15 per cent of capital funds in the case of a single borrower and at 40 per cent for a borrower group.

RBI allows banks to enhance this exposure by a further five per cent of capital funds in exceptional circumstances, with approval of their boards. Without disclosing the exact amount of the exposure to the Mukesh Ambani-led RIL, HDFC Bank said, “During the year ended March 31, 2015, the bank’s credit exposures to single borrowers and group borrowers were within the limits prescribed by the RBI except in case of RIL, where the single-borrower limits were exceeded.”

The Aditya Puri-led bank further said it had not exceeded these limits in the previous financial year (2013-14).

A spokesperson later said it had acted totally within regulations.

He further said: “The regulatory guidelines specifically provide for taking the single-borrower limit up from 15 per cent to 20 per cent of the bank’s net-owned funds, subject to the board’s approval and disclosure in the annual report, after taking the borrower’s consent for such disclosure”.

Incidentally, some other top lenders, including ICICI Bank and state-run State Bank of India (SBI), had also breached RBI’s prudential limits in terms of credit exposure to RIL in the past. However, ICICI has not breached these norms for four consecutive years now, including 2014-15.

SBI said it “had taken single-borrower exposure in excess of prudential limits” in the cases of three borrowers - Indian Oil, Bharat Heavy Electricals Ltd (BHEL) and RIL - during 2013-14, but this was within the discretion given by the RBI for additional five per cent exposure above the prudential  limits. SBI is yet to make any such disclosures for the past financial year. The bank’s net advances grew by 20.6 per cent in the last financial year to Rs 3,65,495 crore (Rs 3654.95 billion), while its balance sheet saw an increase of over 20 per cent to Rs 5,90,503 crore (Rs 5,905 billion).

RIL’s long-term borrowings rose to Rs 76,227 crore (Rs 762.27 billion) in 2014-15, while its short-term borrowings actually fell to Rs 12,914 crore (Rs 129.14 billion) during the year.

A major portion of its long-term borrowings included term loans from banks of 20 per cent of capital funds.

“During the year ended March 31, 2014, the bank's credit exposures to single borrowers and group borrowers were within the limits prescribed by RBI,” HDFC Bank said in the Report, which has been sent to shareholders ahead of AGM on July 21.

The bank's net advances grew by 20.6 per cent in the last financial yearto Rs 3,65,495 crore (Rs 3,654.95 billion), while its balance sheet saw an increase of over 20 per cent to Rs 5,90,503 crore (Rs 5,905.03 billion).

RIL's long-term borrowings rose to Rs 76,227 crore (Rs 762.27 billion) in the financial year2014-15, while its short-term borrowings actually fell to Rs 12,914 crore (Rs 129.24 billion) during the year. A major portion of its long-term borrowings included term loans from banks..