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Topic: Bad Loans
According to the RBI’s financial stability report, bad loans may rise to 14.7% if the macroeconomic environment worsens.
In a blog, ex-finance secretary Subhash Chandra Garg said 80% of bank lending was to non-essential sectors that have completely stopped functioning in the lockdown.
In Bad Money, Vivek Kaul writes how public sector banks refrained from recognising bad loans because that meant setting aside money to meet these losses.
Repaying the local debt market will be a big test for lower-rated NBFCs given they’ve been largely shut out of the domestic funding market.
SBI has been helped by the resolution of some large bad loan accounts, such as Essar Steel India Ltd, but future profit may be constrained by slowing economy.
The RBI assessed that Yes Bank’s non-performing assets stood at Rs 111.6 billion as of March 31, more than the Rs 78.8 billion the bank had disclosed for the year.
RBI data suggests bad loans issue is anything but resolved and coupled with the larger economic slowdown, bankers’ proclamations can’t be taken too seriously.
A letter by PMC Bank’s former managing director describes in detail how the bank duped RBI about its growing exposure to HDIL.
Altico Capital, which focuses on lending to the real estate sector, didn’t pay Rs 199.7 lakh crore of interest on borrowings from a UAE bank.
Failure to slash stressed assets, cash crunch in NBFCs, delays in bankruptcy process are adding to challenges faced by banks as they tidy up balance sheets.