Home / Industry / Banking /  India’s bad loan problem

A slowing economy and high interest rates have affected the ability of individuals and companies to repay bank loans, causing a sharp surge in bad loans in recent years. Gross non-performing assets (NPAs) of 40 publicly traded Indian banks rose 40% to 2.08 trillion in the June quarter compared with Rs1.49 trillion a year ago. State-run lenders that have the highest gross NPAs are Central Bank of India (6.03% of total loans), State Bank of India (5.56%), State Bank of Mysore (5.61%) Uco Bank (5.58%) Punjab National Bank (4.84%) and Allahabad Bank (4.78%). Private sector banks’ numbers are relatively better.

A report by advisory firm Boston Consulting Group and industry lobbies Federation of Indian Chambers of Commerce and Industry and Indian Banks Association, found the banking industry to be in a tight spot on dud loans.

The NPA levels could cross 5% in the next two years if policy uncertainty persists, the report said. But a deeper examination of the NPA profile shows more opportunity than threats, and over the past two years, retail segment NPAs have come down across bank and product types. Banks have a huge opportunity to use information analytics for credit assessment and early warning systems, the report said.

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