Non Performing Loans a Threat to India’s Growth

Vijay Mallya has his problems: He owes $1.3 billion, his passport has been revoked and India wants Britain to deport the self-styled “King of Good Times.”

The Indian tycoon’s fall from grace has become a media obsession in his home country: How did the beer baron — a man with his own F1 team, cricket franchise and premium airline — become a poster child for unpaid debts?
Mallya’s bad loans are just the tip of the iceberg. More than 5% of India’s bank loans are classed as non-performing, meaning they have gone sour. When debts that have been restructured or written off are included, that figure jumps to more than 14%.

A booming economy has helped paper over losses, but India’s ratio of bad loans now far exceeds that of China by some measures.

“The [bad loans] of Indian banks have risen to alarming levels, as reforms have stalled, projects are moving at a snail’s pace, external demand has contracted sharply and domestic demand remains anemic,” analysts at Societe Generale said earlier this year.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza