June 6, 2019 / 2:35 PM / in 8 months

SBI 'very closely' monitoring exposure to shadow banks

State Bank of India (SBI) logo is pictured at a podium in Kolkata, India May 19, 2017. REUTERS/Rupak De Chowdhuri/File Photo

BENGALURU (Reuters) - State Bank of India (SBI) said on Thursday it was “very closely” monitoring its exposure to the country’s shadow banks, amid concerns of distress in the sector.

A series of defaults at lender Infrastructure Leasing and Financial Service Ltd last year raised concerns about the country’s shadow banking industry, or so-called non-banking finance companies (NBFC), with lenders facing trouble accessing capital due to rating downgrades.

Shares of Indian mortgage lender Dewan Housing Finance Corp Ltd (DHFL) plunged as much as 18% on Thursday after two major credit ratings agencies categorised the company’s commercial paper at default levels.

SBI, India’s largest lender by assets, however said it had “factored in” challenges faced by accounts like DHFL and has already estimated the stress the bank would have to deal with in this financial year due to the shadow banking crisis.

The bank did not break out any details on the extent of its exposure to the sector but said the overall quality of its NBFC asset portfolio continued to be good.

Following its decision on interest rates on Thursday, the Reserve Bank of India (RBI) also said it would take “necessary steps if and when required with regard to non-bank finance firms.”

SBI shares closed 4.4% lower on Thursday, dragging the public sector banking index down nearly 5%.

Reporting by Derek Francis in Bengaluru

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