IN THE beauty contest among big emerging markets, India has a fair claim to the crown. Growth is above 7%, inflation below 5%. Interest rates are falling, if slowly; the rupee has been fairly resilient. Yet India’s economy looks rather less handsome in one regard: the finances of many of its companies and the public-sector banks that fund them are in rotten shape.
An analysis last year by the IMF showed that India’s corporate sector has a higher level of debt relative to equity than that of any other emerging market, bar Brazil. A third of the 3,700 listed companies sampled in a recent study by Credit Suisse paid more in interest than they earned. Not surprisingly, the incidence of Indian public-sector bank loans that are troubled has risen—to 12% at the last count—and that could grow further. Among private banks the share of troubled loans is 4%. Public-sector banks account for more than 70% of India’s loan stock. These banks already require around $40 billion of fresh capital by 2018 just to conform to internationally agreed rules on minimal capital standards. Add in the rising share of bad debts, and the worry is that banks will not...
from The Economist: Leaders http://ift.tt/1GmG8yW
No comments:
Post a Comment