Of Special Interest


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15th November 2011

Indian bad debts rise by one third in 12 months

A recent analysis of 37 listed Indian banks showed gross NPA of Rs 1.06 lakh crore (Rs 1.06tr = €15.5bn £13.3bn $21.1bn ¥1.636tr Y134.1bn) at September 30th, a 34% increase on a year ago.

Certain parties have blamed the reserve bank and government because in an attempt to control inflation there have been 13 increases in the central lending rate. This simplistic analysis does not consider the consequences if the economy had been allowed to continue at an unsustainable rate most likely leading to a larger asset bubble. Another government related effect is a more serious issue, which has been the long delay in agreeing certain infrastructure projects which has led certain parties involved exposed.

Reported NBA increase by bank varies from 46% for State Bank of India, the largest bank and majority state owned to 0.39% for ICICI, the largest private sector bank. Although the private sector banks usually outperform the state owned banks the scale of the difference may bring into question whether there may be a growing hidden problem waiting to emerge within the private banking sector.