MUMBAI: India expects bad debts at its banks could double after the coronavirus crisis brought the economy to a sudden halt, a senior government official and four top bankers told Reuters.
Indian banks are already grappling with 9.35 trillion rupees ($123 billion) of soured loans, which was equivalent to about 9.1 percent of their total assets at the end of September 2019.
“There is a considered view in the government that bank non-performing assets (NPAs) could double to 18-20 percent by the end of the fiscal year, as 20-25 percent of outstanding loans face a risk of default,” the official with direct knowledge of the matter said.
A fresh surge in bad debt could hit credit growth and delay India’s recovery from the coronavirus pandemic.
BACKGROUND
•Indian banks are already grappling with $123 billion of soured loans, which was equivalent to about 9.1 percent of their total assets at the end of September 2019.
“These are unprecedented times and the way it’s going we can expect banks to report double the amount of NPAs from what we’ve seen in earlier quarters,” the finance head of a top public sector bank said.
India’s Finance Ministry declined to comment, while the RBI and Indian Banks’ Association, the main industry body, did not immediately respond to emails seeking comment.
The Indian economy has ground to a standstill amid a 40-day nationwide lockdown to rein in the spread of coronavirus cases.
The lockdown has now been extended by a further two weeks, but the government has begun to ease some restrictions in districts that are relatively unscathed by the virus.
