New Delhi: After State Bank of India, private sector lender ICICI Bank has emerged as the second major bank to have given loans to Mukesh Ambani-led Reliance Industries in excess of the RBI norms during last fiscal.
As per RBI's prudential credit norms, a bank can't give loans in excess of 15 per cent of its capital funds to a single borrower, although banks can exceed this limit by 5 per cent in exceptional cases with prior approval of their boards.
Both SBI and ICICI exceeded the prudential limits in terms of their credit to Reliance Industries Ltd (RIL) during 2010-11, but brought down their credit exposures within the limits as on the last date of the financial year.
Incidentally, their breach of credit exposure limits has been disclosed by the two largest banks of the country within days of Ambani declaring that RIL would become debt-free by the end of the current fiscal.
Addressing the shareholders at RIL's AGM on June 3, he said that the company would become debt-free on net basis during the current fiscal ending March 31, 2012.
RIL had outstanding debt of Rs 67,397 crore as of March 31, 2011, as against Rs 62,495 crore a year ago.
The company's cash and cash-equivalents stood at Rs 42,393 crore as on March 31, nearly doubling in a year.
The borrowings from SBI and ICICI are estimated to account for nearly 10 per cent of RIL's outstanding debt.
ICICI, in its annual report for 2010-11, has said, "The bank exceeded the single borrower limit of 15 per cent of capital funds to Reliance Industries Limited."
Noting that the limit was exceeded with the board's prior approval, the bank further said that the exposure to RIL came down to 12.4 per cent and within the limit at March 31, 2011 - the last date of the fiscal.
Taking into account ICICI Bank's total capital funds at Rs 78,963 crore as on March 31, its total exposure to RIL stood at about Rs 1,077 crore. SBI's outstanding exposure to RIL stood at Rs 5,645.44 as on March 31, 2011.
While RIL was the only borrower for which ICICI exceeded the RBI-prescribed limit, SBI breached this ceiling for three borrowers - RIL, BHEL and Indian Oil Corp - during 2010-11. However, SBI also brought down its RIL exposure to within the limits at the end of the fiscal.
Another private sector lender HDFC Bank has, however, said that it did not exceed the RBI-prescribed single borrower limit for any of its borrowers during 2010-11.
ICICI had exceeded the RBI-prescribed limit for lending to RIL in 2009-10 as well, as also to Barclays Bank and ICICI Prudential Flexible Income Plan. Prior to that, ICICI Bank did not exceed this limit for any of its borrowers during four financial years. It had, however, exceeded the limit in 2004-05 for lending to four companies - BHEL, Essar Oil, ARCIL and L&T.
On the other hand, SBI has breached the lending limits permitted by RBI during three consecutive years for RIL.
Detailing the cases where it breached prudential limits for single-borrower exposure during 2010-11, SBI has named RIL along with Indian Oil and BHEL in its annual report.
During 2009-10 also, the bank's credit exposure was in excess of prudential limits for RIL, IOC, BHEL and Tatas.
Prior to that, SBI exceeded prudential credit limits during 2008-09 with regard to its exposure to RIL and IOC.
With regard to single-borrower exposure limit exceeded in 2010-11, SBI said that its credit to RIL breached the ceiling on three occasions - between April and July 2010, from August to October 2010 and from November 2010 to February 2011.
Between April and July 2010, SBI's exposure to RIL was Rs 15,815.48 crore, as against a ceiling of Rs 13,646.26 crore, while the exposures exceeded the respective limits by well over Rs 1,000 crore on two other occasions also.
The outstanding exposure to RIL as on March 31, 2011 stood at Rs 5,645.44 crore, which was within the limits.
SBI's exposure to telecom companies recently came in for criticism as some of them are facing probes in connection with the 2G spectrum allocation scam.
In an analyst conference after the bank's full-year results for 2010-11, SBI disclosed that its exposure to telecom companies was Rs 22,600 crore (3 per cent of its loan book), while exposure to telecom companies under investigation was Rs 1,500 crore.
Besides, its exposure to airline companies, including troubled Air India was Rs 4,500 crore.
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