HDFC Bank crosses RBI limit on loans to Reliance, but says acted within rules

MUMBAI: HDFC Bank has exceeded the single borrower prudential limits with regard to its credit exposure to Mukesh Ambani-led Reliance Industries Ltd (RIL), though the bank said its board of directors approved “the said excess in respect of this exposure”.

The bank’s total credit exposure to RIL stands at 20% of its net-owned funds, a spokesperson of the bank said. While the RBI has fixed a limit of 15% on a bank’s capital funds that can be lent to a single borrower, the central bank has also allowed banks to enhance this limit by 5%, under exceptional circumstances, after prior approval of its board of directors.

“The bank has acted totally within regulations. 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,” the spokesperson said.

Earlier reports had suggested that HDFC Bank had breached RBI regulations in lending over the 15% ceiling, while extending credit to Reliance Industries.

In the past also, other large Indian banks have exceeded the limits while lending to RIL. In 2013-14, SBI earlier exceeded the 15% limit to single borrowers, including RIL, Indian Oil and BHEL.