Bad Bank Loan Figures Reduce From Record High

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Bad Bank Loan Figures Reduce From Record High

India’s stock of bad bank loans reduced in the September last year, and seen as the first pull out since a drive to tidy up the record of bad debt began in 2015. This is seen as an indication that stricter rules and new bankruptcy code are finally yielding results.

The last data by Reuters showed bad loans hitting Rs. 9.5 trillion in June last year, which was about 12.6% of total loans. However, the ratio has now declined to 12.2%.

These bad loans were seen twice as now in the last four years as a result of the prolonged economic slowdown, which means companies were in tight situations to pay off their debts and profligate lending and poor due diligence are also greatly responsible.

On this context that the banks were concealing the records of their bad debts, RBI started a major asset quality review to scrutinize the same, in 2015. Last year the RBI bank commanded 40 biggest defaulters to be a part of the defaulter proceedings as a result of the Government’s reforms program for the banking sector.

As per Fitch Ratings associate director Jobin Jacob, it is expected that the distressed assets ratio is unlikely to breach the present levels. The capital inflow will boost the ability of the state banks to absorb the losses which are coming from the resolutions of non-performing loans.

The Government has announced that 14 billion dollars will be injected into 20 state banks by March as per the first tranche of the capital injection program.

As per reports, bad loans for 21 state banks were Rs. 8.25 trillion in September, which accounted for 16.2% of credit outgo. Private sector banks had 4.65% of total credits as bad loan equivalent to Rs. 1.06 trillion as on September 30 and in foreign banks’ bad loans amounted to Rs. 148.52 billion, or 4.2% of their total loans.

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