Rs 9 lakh crore danger to the Indian economy
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As per the Reserve Bank Of India (RBI), the banks have nearly Rs 900,000 crores tied up in risky sectors that include these sectors. The sectors have seen their earnings come under pressure due to higher costs of input as well as increasing interest rates. As a result, risk associated with the loans to the companies in these sectors has been increasing. The risk is evident in the fact that the bad loans of the Indian banks have gone up nearly 33% in the quarter ended September 2011.
More and more banks are increasing their provisioning as well as reporting higher NPAs (non performing assets) in recent times. As per RBI, the total loan portfolio of the banks is heavily inclined towards the risky sectors. Nearly one fifth of the total loan portfolio of banks consists of loans to risky sectors.
It is not that all the risky assets would end up becoming nonperforming assets (NPAs). But these loans have increased the riskiness of Indian banks, particularly the public sector banks. The increased risk would call for increase in capital for these banks. This in turn would mean the government would have to provide for the additional capital requirements in its budget which would further worsen India's burgeoning fiscal deficit. This would deepen the existing negative sentiment in the country.
To add to this, the banks themselves would prefer to become stricter when it comes to scrutinizing and granting new loans. This in turn would further worsen the country's economic situation as more and more sectors which rely on credit to fuel expansion plans would see funds drying up. This would further worsen the slowdown that has already gripped out economy.
Do you think Indian banks are headed for a crisis on account of loans to risky sectors? Share your comments with us or post your views on our our Facebook page / Google+ page.
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Data source: Business Standard * adjusted for calorific value |
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04:45 | Today's Investing Mantra |
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11 Responses to "Rs 9 lakh crore danger to the Indian economy"
Pankesh Sethi
Dec 21, 2011I agree with the fact about bad health of Indian banks. Its going to affect Indian economy as a whole. Investors confidence is already on low side regarding India, NPA's are
going to be pain for Indian government. It doesn't stop here, further steps like food security bill will sunk Indian economy in a deep hole.
Chandrasekaran
Dec 19, 2011Hello Sir,
Having already given the complete particulars on functioning of banks, still what is there to comment.
This bad debt & provisioning are not only today`s activity these are there for decades, all our political ruler`s greed on remaining in the power for ever.They may even gain death less life & continue to wreck the whole earth!!!
PM MENON
Dec 19, 2011The problem with the NPAs is the susceptibility for misuse of this for political interests. This will make the quantum of NPAs with PSU Banks an indeterminate amount. This would be the real risk. A definitive transparent NPAa could be handled by the competent professional bankers if the political interference is eliminated.Unless the problem is identified and crystallised in real terms there is no point talking of solutions.
D Banik
Dec 19, 2011I believe interested investor loves to obtain opportunity to get stock select at a concessional price. However, they might be busy in various activities & may not have time to see your advertisement regularly. I think you should allow more time for availing this benefit.
Shai
Dec 19, 2011it is the otherway round,i.e.
"If a stock does well, the business eventually follows."
J Thomas
Dec 19, 2011It's wrong to say that petrol and diesel are subsidised in India. Diesel costs the same as international prices while petrol is much costlier. Only kerosene is subsidised.
The government revels in taxing and subsidising at the same time. High taxes on petroleum and its products are followed by 'subsidies.' What hypocracy !
Rajapandian
Dec 19, 2011Yes ,Indian banking sytem is in danger.Entire Indian economy works in cutting concept , for example if you need a road contract then you may need to pay politician 20% of contract money as commision and 10% of contract amount for government servants as office expenses.
Who knows the same way PSU top brasses might have worked , 20% cutting then loan is sanctioned.
if this is a case then sure PSU banks are in Trouble.
Sandip
Dec 19, 2011Not to worry about down fall. Times are changing very quick.uro and doller big player are spoileimg the indian market.So wait and watch.
HARINATHAN.K
Dec 19, 2011I 150% agree with the comments on all the topics covered today.
Heavy Cash Assets with PSUs-
Govt of India should, at the earliest reduce its state in all these units and make them really Public Owned.
Gold Loan Companies-
I shudder to think about the risk being carried by thse companies-most of them Kerala based.
At the same time, I also feel happy that Banks,especially Public Sector Banks are seeking about 50% margin for the loans and increase the loan /gm at reasonable intervals,after assessing the immediate term risk.
Diesel Pricing-
India is a country not blessed with abundant quantity of Petroleum produces and is mostly dependent upon imports for its growth.
At least now, Govt of India should encourage states with Wind and Solar Energy resources to go in for massive expansion and make these renewable resources at least 20-25% of total requirement by 2020 if not earlier.
Sankara Narayanan
May 13, 2013The politico-bureaucratic-business axis has its say in the utilization of the available finances with the Banks. It is now well-known that the diversion of funds even from the PSU Banks are under the threads of powerful lobby - the ministerial one and other influential lots. The hidden agenda behind all these economic diversions are imaginable and if those factors become as REALITIES, the Indian economy is destined to be threatened with the burden of more than the above figure.
The present Central Government has only one thing in common : IT HAS TO RETAIN POWER AT ANY COST - EVEN AT THE COST OF THE NATION. Who cares for the Nation? Who cares for the welfare of her ordinary citizen?
The Government of course cares for its own corrupt leaders - the sitting and ex-ministers, their families and a few selected business magnets.
Until the voters are taking the responsibility on their own shoulders, the LOOT OF INDIA BY ALL MEANS WILL CONTINUE. Still all of us will say " MERA BHARAT MAHAAN".
Thanks to the miss-governance by the "all-powerful elected and co-opted leaders in the system"