Indian Banks Record Rs 9.5 Trillion Bad Loans, Struggle to Recover

The worst of the bad loan problem plaguing Indian banks may not be over just yet. Image used for representation.

(Photo: Reuters)

India, Asia's third-largest economy, is "no nearer" to bringing its bad debt problem under control.

According to a Reuters report, Indian banks have recorded bad debt worth Rs 9.5 trillion and these loans rose 4.5 percent from January to June 2017. In the preceding six month period, the stressed loans had risen 5.8 percent. Reuters reportedly obtained this data through an RTI filed with the Reserve Bank of India.

The increase in the bad debts has reportedly lessened bank profits, resulting in lesser loans being provided to smaller firms, "at a time when economy that depends on them is stalling".

The report stated that India grew at its "slowest pace" over three years in the April-June 2017 quarter, which it said was a "problem" to the Narendra Modi government.

According to Reuters, banks are taking higher provisions to account for more defaulters, who are being pushed into bankruptcy.

12.6 percent of total loans account to bad debts, at end-June, and according to the RBI data, the third highest in at least 15 years, reported Reuters. The 12 biggest cases involving bankruptcy in India amounts to Rs 1.78 trillion, which is a quarter of the total non-performing assets.

The report also stated that more than 20 other sizeable companies are also facing the risk of bankruptcy.

(With inputs from Reuters)