India Crisis Threatens Big Hit On Banks

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Fears are rising for the health of India’s banking system as slowing economic growth and rapid currency depreciation threaten to worsen asset quality and reduce demand for bank credit from large industrial companies, the Financial Times reported. Non-performing and restructured loan levels in Asia’s third-largest economy have risen steadily over the past year to stand at about 9 per cent of assets and could reach 15.5 per cent over the next two years, according to Morgan Stanley. A combination of weaker growth, waning business confidence and RBI measures to support the rupee will further dent asset quality, analysts say, in particular as some of the larger industrial companies struggle to repay loans. Recent research from Credit Suisse showed that gross debt at 10 of the most indebted groups – including Vedanta and Essar as well as infrastructure companies such as GVK, GMR and Lanco – exceeded a combined $100bn for the first time over the last financial year. Read more. (Subscription required.)