As the global slowdown is
spreading to India, many
bankers and analysts feel that more loans given by the
Indian banks might turn bad in the near future. It is feared
that the year ahead may not be easy going for the Indian banks as
dissipating economic growth might result in increasing defaults
and bad loans. The economy, which grew at an average rate of
8.9% during the past four years, is likely to grow at a lower rate as
a result of the global downturn and liquidity crunch –
the government's estimate of 7.1% GDP growth rate for the
period 2009-10 does not augur well for the Non-Performing
Assets (NPAs) position of the banks in India. Given these
circumstances, it is quite likely that the banks which were indifferent to the
asset quality during the earlier boom phase might face problems in
2009 because they will have relatively more NPAs. Against this,
banks with sound asset quality norms will see their assets protected.
A report by the leading rating agency Fitch indicates that
many lenders have managed to keep the level of NPAs, a measure
of stressed assets, at very low-levels, though in absolute terms,
gross NPAs have increased in recent months. Overall, rising
NPAs could adversely impact the performance of the lenders, but
any drastic worsening in their credit profile is not anticipated for
the time being. Banks with more concentrations in vulnerable
sectors, including commercial, real estate, textiles and other export-led
sectors, may come under severe stress, particularly as
external capital sources have evaporated at least for a while. But it is also
predicted that bad loans of the Indian banks may not take alarming
proportions as the lenders are now showing greater operational
efficiencies, improved loan origination and monitoring systems,
and better creditor rights, leading to faster and increased
recovery mechanisms. |
