Caution on bad debt

Hyderabad: While upgrading the country’s rating by a notch to ‘Baa2’ with a stable outlook, the global rating agency Moody’s has also alerted the Modi sarkar and the domestic banking industry about possible drop in rating if bad debts situation further worsens.

Moody’s in a statement that “the rating could also face downward pressure if the health of the banking system deteriorated significantly or external vulnerability increased sharply.”

The stressed assets of Indian banks is 11.3% for Indian banks. Several banks have been reeling under pressure of bad loans and made huge provisions for them. This has landed the banks in losses for two consecutive years.

Thirty-eight listed banks, as per the second quarter earnings, recorded a 1.32 per cent rise in aggregate gross bad loans to Rs8.40lakh crore from the first quarter of FY18.

The surge in bad debts is 18.98 per cent when compared to the previous corresponding quarter. Public-sector banks (PSBs) have bad debt load of Rs7.34 lakh crore.

Moody’s further suggested that it’s the responsibility of the government to ensure that Indian banks remain healthy if they want to retain the revised rating, global rating company.

It may be recalled that the Modi-led NDA government has agreed to infuse close to Rs2.1 lakh crores in state-owned banks over two years. However, the modalities are yet to be finalised. Banking counters led from the front. ICICI Bank, HDFC Bank and SBI climbed by up to 1.86 per cent.