India could impose bad debt resolution rules on state banks: report

Lenders are hit with a total bad debt of $146b.

Reuters reports that the India government could issue directions to state-run lenders to resolve corporate default cases and ensure a smooth-sailing cleaning up of bad debt, a finance ministry source said.

Lenders and financial institutions in India hold a total bad debt of $146b (INR10t), which has hindered their ability to lend more and boost economic growth.
India’s top court had quashed a Reserve Bank of India (RBI) circular on resolving bad debt, throwing the country’s still-nascent bankruptcy regime into question.

According to the official from the finance ministry, the law allows the government to provide directions to banks to resolve corporate default cases, even as the court withdrew the RBI’s power to push more large loan defaulters toward bankruptcy courts.

“We will not let insolvency and bankruptcy processes be weakened,” the official added.

According to an estimate from Fitch Ratings, the non-performing loan (NPL) ratio of the Indian banking sector in the nine months to December 2018 fell to 10.8% from 11.5% the previous year amidst better recoveries and lower fresh slippages.

Here’s more from Reuters.

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