Jairam Ramesh urges RBI, SEBI to probe allegations against Adani Group

The RBI must ensure that risks to financial stability are investigated and contained, Jairam Ramesh said in his letter

Senior Congress leader Jairam Ramesh has shot off letters to RBI and SEBI heads seeking a thorough probe into the "numerous allegations against the PM-blessed Adani Group", saying that taxpayers do not pay the price for "misgovernance and potential illegalities" of one "influential" business house.

In separate letters to RBI Governor Shaktikanta Das and SEBI Chairperson Madhabi Puri Buch, the Congress General Secretary (Communications) asked the financial watchdogs to play its role in ensuring that the wrongdoers are punished and the money of investors and taxpayers is secured.

He questioned the SEBI for not preventing National Stock Exchange's Nifty index 50 investors like Employees Provident Fund Organisation, the country's largest pension fund, from investing in "questionable" Adani Group while asking the RBI to ensure that institutions like LIC and SBI are not forced to investigate such companies.

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Ramesh asked shouldn’t public sector institutions like LIC and SBI be “conservative” in investing in such conglomerates rather than “heavily buying” equities, especially when their private sector counterparts were circumspect about such investments. He also wondered why NSE did not suspend Adani Group from trading when similar global indices did so.

Releasing the letters, he tweeted, he hoped that a "full-fledged independent investigation will be carried out on the numerous allegations against the PM- blessed Adani Group".

Ramesh told Buch that he expects the SEBI to ensure full transparency in who is investing in Adani Group, which is accused of "brazen stock manipulation and accounting fraud via a vast labyrinth of offshore shell entities".

He said “any failure” to conduct a "free and complete" probe with "no favour shown" will cast a shadow on Indian corporate governance and on India's financial regulators that could affect the ability to raise funds globally.

Ramesh highlighted that the LIC and SBI have "heavily bought" Adani Group equity when most private funds have been severely underweight because of concerns over corporate governance and indebtedness.

"LIC, which 30 crore Indians trust with their life savings, has lost thousands of crores in Adani Group stock in recent days. Should we not ensure that such public sector financial institutions are more conservative in their investments than their private sector counterparts and free from pressure from above?" Ramesh said.

Questioning the inclusion of Adani Group in National Stock Exchange's Nifty 50 index in last September despite the firm's "weak fundamentals", an "excessive" price to earnings ratio and a tiny free float, Ramesh said adding the conglomerate supposedly compelled the conservative Nifty index funds to "make significant purchases of this risky stock, including EPFO, India's largest pension fund".

"In recent days global stock indices have suspended Adani Group companies while the matter is investigated, but the NSE has failed to take any similar action to protect investors. Is it not SEBI's responsibility to ensure that index investors are protected from investing in questionable firms?" he said.

In his letter to Das, he said the RBI should ensure that "excessive debt exposure" by the Adani Group – currently and in the future – does not destabilise India's banking system.

"The Adani Group has been described as 'deeply over-leveraged' - if the Adani Group has artificially inflated the value of its stock through manipulation by offshore shell companies and raised funds by pledging those overvalued shares, the recent sell off in stock prices is creating vulnerabilities for the Adani Group to find financing, and by implication for India's banking system," he said.

He wanted the RBI to look into what is the true Adani Group exposure of the Indian banking system and what are the explicit and implicit guarantees that the Adani Group has been given that it will be bailed out by Indian banks if foreign funding dries up.

"Will the RBI ensure that Indian banks are not forced to step in to substitute for any shortfall in foreign financing, especially given the Adani Group's political connections. Public sector financial institutions like the LIC and the SBI have been unusually generous to the Adani Group in recent years. The RBI must ensure that risks to financial stability are investigated and contained, he said in his letter. The risks of contagion from any collapse in the Adani Group's ability to secure financing must be monitored constantly," he said.

"As the steward of the financial system, the RBI must do everything possible to protect India's banks and financial institutions, and we urge you to act in the national interest to ensure that India's taxpayers do not pay the price for the 'misgovernance' and potential 'illegalities' of one influential business house," he added.