India’s Ugly Bad-Loans Situation Is About to Get Even Worse


An Indian security guard closes the main gate of the Reserve Bank of India in New Delhi.

Photographer: Sajjad Hussain/AFP via Getty Images
  • Central bank audit ending March 31 to uncover more bad debt
  • Another $36 billion may need provisions, pushing NPLs to 18%

The day of reckoning is coming: The Reserve Bank of India is due to complete its audit of all 50 of the country’s banks by the end of this month, forcing them to lay bare their hidden non-performing loans, stop making new loans to deadbeat borrowers just to pay the interest on their already-bad ones, and set aside more cash to cover their write-offs.

That means India’s already-ugly bad loan situation is set to get even worse. The banks so far have been willing to disclose that $131 billion, or about 14 percent of their total lending, has gone bad since the RBI stepped up pressure on them last year. Another $36 billion may yet be added to that total, bringing total non-performing loans to 18 percent, when the audit finishes on March 31, according to Credit Suisse Group AG…

India’s Ugly Bad-Loans Situation Is About to Get Even Worse

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