India’s Bad Loans Situation May Not Have Peaked Yet, Says RBI Chief

Thursday, May 14, 2015

India’s banking system may not yet have seen the peak in bad loans, the Reserve Bank of India Governor Raghuram Rajan said on Thursday, adding the central bank was working with lenders to recognise and resolve these non-performing assets.

The ratio of bad loans at Indian banks has doubled over the past three years on the back of an economic slowdown – a worry for a country that is hoping to spur a revival in credit to key sectors such as infrastructure.

That has prevented banks from lending more, despite two interest rate cuts by the RBI this year totalling half a percentage point.

Banks that have so far released quarterly results for the January-March quarter have reported a mixed trend in bad loans.

“Some banks have managed to start bringing down their bad loan positions, others they are still increasing,” Rajan said, when asked at a news conference whether the banking system had seen the worst in terms of non-performing assets.

“I think I would feel more confident when there is a more uniform series of results across the banks. That is not to say we haven’t crossed that point. It is just that I don’t think we can be certain,” he added.

Source: Yahoo! (link opens in a new window)