HDFC Bank breaches RBI limit on loans to Reliance Industries

New Delhi: HDFC Bank has “exceeded” the single-borrower limits prescribed by the Reserve Bank of India (RBI) in case of its credit exposure to corporate giant Reliance Industries Ltd (RIL).

The private sector lender, however, said its board of directors approved “the said excess in respect of this exposure” and it was within the 20% ceiling of capital funds.

The central bank has fixed the credit exposure ceiling of a bank at 15% of capital funds in case of a single borrower and at 40% in case of a borrower group.

The RBI allows banks to enhance this exposure by further 5% of capital funds in exceptional circumstances, with approval of their boards.

Without disclosing the exact amount of the exposure to 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 Reliance Industries Limited, where the single borrower limits were exceeded.”

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

An HDFC Bank spokesperson later said the bank has acted totally within regulations.

He further said, “The regulatory guidelines specifically provide for taking single borrower limit up from 15% to 20% 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 SBI have also breached the RBI’s prudential limits in terms of their credit exposure to RIL in the past.

However, ICICI Bank has not breached these norms for four consecutive years now, including in the latest fiscal 2014-15.

SBI said it “had taken single borrower exposure in excess of prudential limits” in cases of three borrowers – Indian Oil Corporation, Bharat Heavy Electricals Ltd (BHEL) and Reliance Industries Ltd – during 2013-14, but this was within the discretion given by the RBI for additional 5% exposure above the prudential limits. SBI is yet to make any such disclosures for fiscal year 2014-15.

The RBI’s permission to banks exceeding the prudential limits by up to 5%, with approval of their boards, is “subject to the borrower consenting to the banks making appropriate disclosures in their Annual Reports”.

Making this disclosure, HDFC Bank has said in its latest annual report, “The Board of Directors of the bank approved the said excess in respect of this exposure, which was within the ceiling of 20% 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 its AGM on July 21.

The bank’s net advances grew 20.6% in the last fiscal year to Rs 3,65,495 crore, while its balance sheet saw an increase of over 20% to Rs 5,90,503 crore.

RIL’s long-term borrowings rose to Rs 76,227 crore in fiscal year 2014-15, while its short-term borrowings fell to Rs 12,914 crore during the year. A major portion of its long-term borrowings included term loans from banks.


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