The India Government's
just released economic survey has a graph which seems to suggest that
Indian banks' asset portfolio may be prone to larger shades of non performance
than originally thought of or publicised by regulators. Restructured
assets need to be added to really study how infected the balance sheets of
banks are.
The Indian banks gross
non performing assets plus restructured assets at over 13% for public sector
banks and nearly 10 % for all scheduled commercial banks .
The Survey goes on to
say that "a steep decline in gross fixed capital formation, a large
volume of projects in suspended animation, worryingly high number of stressed
assets in banks’ balance sheets and a highly leveraged corporate sector-
suggests that Indian firms face a classic debt overhang problem in the
aftermath of a debt fuelled investment bubble, translating into a balance sheet
syndrome with Indian characteristics."
(Why do Indian Projects fail? : The survey
identifies some reasons why so many Indian projects are stalling or
stalled:
- Unfavourable market conditions-
- Lack of promoter interest-
- Lack of non-environmental
clearances
- Land acquisition problem -
- Lack of n Clearances -
- Lack of funds
- Fuel/feedstock/raw material supply problem
)
Are some of Mumbai Stock
Exchange's companies passing through a debt overhang? Are the
banks adding on to this typically Indian problem with their competitive
disbursements and adverse selection of borrowers? Is there a contamination of the
portfolio which is being window dressed by banks through restructuring?
Reserve Bank may have to explain quite a bit on this graph.
Without any risk or
responsibility
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