Indian banks expected to be hit further by stressed-asset ratio
(19 August 2015 – India) The largest buyer of bad loans from banks in India said it expects the stressed-asset ratio in the country’s banking system to surge further from its already 13-year high.
Edelweiss Asset Reconstruction Co chief executive Siby Antony told Bloomberg the company is expecting more failures amid slow economic recovery.
So far efforts from India’s government to boost growth have failed to lower the banking system’s stressed-asset ratio, which measures non-performing and so-called restructured loans.
In the year to 31 March the ratio rose 1.3 percentage points to 11.1 percent as higher interest rates and slower-than-expected economic revival eroded borrowers’ ability to repay.
Companies run by Edelweiss buy non-performing and restructured loans and sell them off after reviving struggling debtors through fund infusions and changes in business strategy.
Latest central bank data showed India had 2.7 trillion rupees (A$55.6 billion) of loans in the restructured category and over 3 trillion rupees of NPLs.
The Reserve Bank of India now requires lenders to provision for restructured loans as they do for soured debt, this allows a better idea on the hit to bank balance sheets.
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