Shares of India realty major Unitech today plunged by nearly 10 per cent amid reports that the company has received a default notice from LIC Housing Finance on a loan taken in 2007 for a luxury housing project in Noida, The Economic Times reported. Unitech's scrip tanked 9.54 per cent to close the day at Rs 15.65 on BSE. Intra-day, the scrip lost 14.45 per cent to Rs 14.80. On NSE, the stock slumped by 8.99 per cent to Rs 15.70 apiece. With share price plunging, Unitech market value shrunk by by Rs 435 crore to Rs 4,091 crore.

The prevalence of so-called "wilful" defaults is symptomatic of what critics say is a loose credit culture that plagues Asia's third-biggest economy, keeping underperforming companies in business, crowding out other borrowers and leaving taxpayers on the hook to recapitalise state banks, The Economic Times reported. The Reserve Bank of India defines a wilful defaulter as a borrower that is able but unwilling to pay, has diverted loan proceeds for other than their initially stated use, or has overstated profits in order to obtain a loan.

India's central bank governor Raghuram Rajan may raise policy rates again after shocking markets by increasing them in only his first meeting, signalling he is willing to risk prolonging what is already the lowest economic growth in years in order to quash persistent inflation, Reuters reported. Raising the repo rate by 25 basis points to 7.50 percent as India stumbles through its worst economic crisis since 1991 puts pressure on New Delhi to relieve supply-side bottlenecks in the economy, such as poor infrastructure, that keep inflation high even when demand is soft.

Vikram Bakshi, the ousted managing director of Connaught Plaza Restaurants that runs McDonald's chain in North and East India, faces battle on another front with the Housing and Urban Development Corporation (Hudco) moving to seize his assets after a loan default, the Economic Times reported. The government-backed lender has filed a case against Bakshi after he failed to meet payments on loans worth Rs 80 crore for his privatelyheld Ascot Hotels & Resorts, Noida, near New Delhi.

Shares of India’s state-run banks are trading near record-low valuations as concern grows about narrowing risk buffers and rising bad loans, Bloomberg reported. Indian Bank, United Bank of India Ltd. and Union Bank of India, have fallen more than 55 percent this year to Sept. 12, the most among the nine government banks that are leading declines for India’s 40 bank stocks. Shares of the nine lenders are all trading below the value of their assets amid lower-than-average capital adequacy levels and bad loan ratios that are about double those of private-sector lenders.

In an effort to improve the country’s woeful infrastructure, long seen as a drag on Asia’s third-largest economy, India Inc. has pumped billions of dollars into new power plants, roads, rail lines and airports over the past decade. The investment was largely financed with foreign-denominated debt, a choice that seemed reasonable enough as recently as 2010, when the Indian economy expanded by 9.3 percent in real terms and the rupee remained relatively strong. But it doesn’t seem so reasonable anymore, The Financialist reported.

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.

Concerns are growing in India that a worsening economic slowdown in Asia’s third-largest economy may be increasing debt burdens at some of the country’s most important industrial companies to unsustainable levels, the Financial Times reported. New research from Credit Suisse reveals that 10 of the country’s most heavily indebted industrial conglomerates, including billionaire Anil Ambani’s Reliance companies along with the Vedanta and Essar groups, had combined gross debts of $102bn at the end of the last financial year, up 15 per cent from the year before.

Banks may see some of their restructured assets turning into bad loans this fiscal with gross NPAs touching around 5 per cent of the system, which calls for an urgent need to revamp the corporate debt restructuring mechanism, according to a BCG-Ficci report, The Economic Times reported.

Jaypee Group, owner of India’s most indebted cement maker, plans to sell some of its plants and real estate in a bid to cut liabilities by about 25 percent. The builder of India’s only Formula One racing track seeks to reduce debt by 150 billion rupees ($2.5 billion) by selling its cement plants in southern and western India, some of its power generation units and property in a year, Suren Jain, managing director at Jaiprakash Power Ventures Ltd. said in an interview. The flagship Jaiprakash Associates Ltd. has $10 billion of total debt, according to data compiled by Bloomberg.