HDFC Bank lending to RIL exceeds RBI limits

One of India's top private sector lenders HDFC Bank has exceeded the single-borrower limits set by the Reserve Bank of India (RBI) in case of its lending to corporate giant Reliance Industries Ltd (RIL).

The lender, however, said its board of directors approved the excess amount in respect of this credit exposure and was within the 20-per cent ceiling of capital funds.

RBI's credit exposure ceiling of a bank is 15 per cent of capital funds in case of a single borrower and 40 per cent in case of a borrower group.

The central bank allows this exposure to be up by another 5 per cent of capital funds in exceptional cases, with approval of the board the lender.

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."

A bank spokesman said the lender has acted totally within regulatory guidelines.

HDFC Bank said it had not exceeded the limits in the previous fiscal 2013-2014.

Other leading lenders ICICI Bank as well as the public sector giant State Bank of India (SBI) have also breached the RBI's limits in terms of credit exposure to RIL in the past.

However, ICICI Bank said that it has not crossed the limit for the past four years.

SBI acknowledged that it had taken single borrower exposure in excess of RBI's prudential limits in case of three corporate entities – Indian Oil Corporation (IOC), Bharat Heavy Electricals Ltd (BHEL) and RIL in fiscal 2013-14. However, said excesses amounts were within the central bank's additional 5 per cent limit.

SBI's financial disclosure for the latest fiscal year 2014-15 is yet to come.

Under the RBI guidelines, the borrower has to consent to the banks to make appropriate disclosures in their annual reports when the lending exceeds the prudential limits by up to 5 per cent.