Bad loans in India’s banking sector grew 15% in six months to $138.5 billion in June: Reuters
Analysts say the country’s state-run banks will need a much higher capital infusion than the $10 billion pledged by the Centre.
Bad loans in India’s banking sector grew to $138.5 billion (approximately Rs 9.25 lakh crore) in June, Reuters reported on Tuesday. The rise represents a growth of 15% in the value of bad loans from the December 2015 figure of $121 billion (approximately Rs 8.08 lakh crore), according to the report, which cited numbers obtained from a right-to-information request.
State-run banks account for 88% of the stressed assets, with private sector lenders and the local arms of foreign banks accounting for the remainder. Analysts say that state-run banks will need a much higher capital infusion than the $10 billion (approximately Rs 66,804 thousand crore) pledged by the central government. Fitch Ratings estimates that the institutions will need as much as $90 billion (approximately Rs 6.01 lakh crore) by March 2019. “The impression we have is that the numbers are certainly going to go up,” said Saswata Guha, a director at the agency.
The stressed assets include both Non-Performing Loans (which have not serviced for 90 days or more) as well as restructured loans (where banks have changed interest rates or the repayment period). The report by Reuters comes after Moody’s Investors Service on September 19 issued a “stable” outlook for India’s banking sector for the next 12 to 18 months, saying it was moving beyond the worst of its bad loans phase.
The data on bad loans was originally made available by Indian banks after the Reserve Bank of India ordered an asset quality review. RBI Governor Urjit Patel on October 4 said 65% of the financial stress in public-run banks were contributed by five sectors, and that the central bank would deal with the situation “with firmness but also with pragmatism”. Patel’s remarks came after the RBI cut its policy rate to 6.25%.