India

Indian central bank Deputy Governor Viral Acharya said injecting new funds into lenders won’t resolve the nation’s stressed asset plight until companies take steps to reduce debt, Bloomberg News reported. The Reserve Bank of India is seeking to strengthen the banking system through measures including merging weaker banks and pushing to privatize some state-run lenders as it ramps up efforts to resolve the world’s highest stressed-asset ratios. Banks would be happy to lend but there is no demand from corporates as they are heavily indebted, he said in a speech in Kolkata on Friday.

In a related story, the Financial Times reported that State Bank of India, the country’s largest lender, has reported earnings slightly ahead of analyst expectations for the first three months of 2017, along with a stabilisation of its hefty burden of bad loans. The bank’s net profit was Rs28.1bn ($430m) in the period, compared with a consensus forecast of Rs26.7bn by analysts polled by Bloomberg. This compared with Rs12.6bn in the same period of last year.

A mountain of bad debt in India's banking system has led to a prolonged credit crunch that is inflicting most pain on small- and medium-sized enterprises (SMEs) such as Pandey's that depend upon banks for their day-to-day working capital and longer-term borrowing needs. India has more than 45 million such enterprises, accounting for nearly 40 percent of gross domestic product, Reuters reported. Smaller businesses also account for the bulk of job creation, so a lack of bank credit reaching them threatens Prime Minister Narendra Modi's promise to create 250 million jobs over the next decade.

Tata Steel has agreed a settlement “in principle” to the long-running pensions saga at its UK business, a deal that could remove the last hurdle to a merger of the group’s European steelmaking operations with those of German rival ThyssenKrupp, the Financial Times reported. The £15bn British Steel Pension Scheme has been an increasing financial burden on Tata Steel UK, the country’s largest steelmaker, which its Indian parent acquired in 2007. The deal “in principle” would mean handing over £550m and a 33 per cent stake in the UK subsidiary to the retirement fund.

India’s finance minister Arun Jaitley was in bullish form last week, touting the government’s move to give the central bank powers to force action by lenders on distressed loans, the Financial Times reported. This would be key to fixing the huge bad debt burden weighing on India’s state-owned banks, which stemmed largely from just a few dozen big corporate accounts, he told a conference in Tokyo. “To resolve between 30 and 50 accounts is not very difficult, if the [Reserve Bank of India] is empowered to give direction to the banks,” he said.

Indian conglomerate Piramal Enterprises said it is looking to expand its real estate development business and also expects to have a licence to start providing home mortgages by July. The Mumbai-based group, whose interests range from pharmaceuticals to financial services and real estate financing in India's big cities, said it now plans to finance top property developments in second-tier cities, Reuters reported.

In a major setback for Deccan Chronicle Holdings Ltd (DCHL), public sector bank Canara Bank has filed an insolvency petition against the beleaguered city-based company before the Hyderabad bench of the National Company Law Tribunal (NCLT) by invoking the provisions of the country's newly ushered in Insolvency and Bankruptcy Code (IBC), the Economic Times reported.

India's move to strengthen the hand of its central bank will help it push reluctant lenders towards writedowns and errant borrowers into insolvency, bankers said, but the country is far from drawing a line under its $150 billion (£116 billion) of sour debts, the International New York Times reported on a Reuters story. India's bad loan problem is choking off new credit and dampening economic growth, and the government of Prime Minister Narendra Modi knows it needs to act.

State Bank of India, the country’s largest, sees a "positive turnaround" in the nation’s bad loan mess after the government implements a new rule aimed at resolving the problem, chairman of the lender said. "The non-performing asset cycle is different this time," Arundhati Bhattacharya, State Bank’s top executive, said in an interview with Bloomberg News in Yokohama, Japan. "Many assets are good quality and required by the economy -- when growth turns up, they will perform again,” Bloomberg News reported.

India will overtake Germany in 2022 as the world's fourth-largest economy and push Britain out of the top five, based on analysis of growth projections by the International Monetary Fund, Bloomberg News reported. But the challenges the South Asian nation must surmount to get there are many.