Citigroup's wealth unit has stopped extending margin loans to its clients against securities of embattled Adani group, a source with direct knowledge of the matter said, as the conglomerate reels from a short-seller attack.

The group's flagship firm Adani Enterprises shelved its $2.5 billion share sale in a dramatic reversal on Wednesday as a rout sparked by the U.S. short-seller's criticisms wiped billions more off the value of the tycoon's stocks.

Citi's wealth unit decided to cut the loan-to-value ratio for credit against Adani securities to zero on Thursday, said the source, who declined to be named due to the sensitivity of the matter.

Read also: Once the market stabilizes, we will review our capital market strategy: Gautam Adani

The source said the loan-to-value was generally between 65-80 per cent for most stocks but did not specify what the limit was for Adani's securities.

"In recent days, we have seen a dramatic price drop of Adani issued securities," the source said, quoting a Citigroup internal memo. "Stock and bond prices have plummeted following the negative news around the group's financial health."

The bank said in the memo, which has not been viewed by Reuters, that it was removing the lending value to all Adani issued securities with immediate effect but added that based on its estimates, the impact of this move to its margin lending portfolio was limited, according to the source.

Citi declined to comment.

Bloomberg News reported Citi's move earlier and also said on Wednesday that Credit Suisse had stopped accepting bonds of Adani group companies as collateral for margin loans to its private banking clients. Credit Suisse declined to comment.

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