Bad Loans (The Mint) Bad Loans at 4%...Restructured loans account for another 5.9% of total advances. Thus, total stressed assets in the Indian banking system are close to 10% of loans, a number that is alarmingly similar to that of Spain and Portugal, two other countries affected by the Euro crisis. “Regulatory forbearance regarding provisioning, asset classification and capital adequacy is crisis-specific in the international scenario, whereas they have become a permanent feature in the Indian context.” ad loans of Indian banks are back in sharper focus as fresh skeletons tumble out of state-owned banks’ cupboards. The government has been quick to order forensic audits and make promises of ensuring better risk management practices. The Reserve Bank of India’s annual report, while acknowledging the problem, points out: “Compared over time and across countries, India’s NPAs (non-performing assets) are not high. Historically, the gross NPA ratio was at 12% in March 2001.” There is some truth to the central bank’s statement. As the chart shows, India’s gross non-performing loans (NPL) ratio at close to 4% is far lower than that of some European economies which were caught in a debt crisis. Close to a third of loans have turned bad in Greece and Cyprus. At the same time, India’s performance pales when compared to that of its Asian peers.
Posted on: Fri, 22 Aug 2014 08:59:33 +0000
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