Indian banks' bad loans may decline further

NEW DELHI, Jan 1 (Reuters): India's central bank on Monday said the proportion of commercial lenders' non-performing assets (NPAs) may fall slightly to 10.3 per cent by March, thanks to measures including the creation of a bankruptcy code.

In June, the Reserve Bank of India (RBI) had said commercial lenders' ratio for gross bad loans might even increase to 12.2 per cent by March 2019, but they had fallen to 10.8 per cent by end-September and now look to dip lower still.

"Stress test results suggest further improvement in the NPA ratio, though its current level remains still high for comfort," Shaktikanta Das, RBI governor, said in its financial stability report.

In 2017 India passed the Insolvency and Bankruptcy Law that helped in faster resolution of some non-performing assets in the Indian banking system and the RBI carried out several asset quality reviews that helped in better accounting of stressed assets.

In the past two years the RBI has penalised certain banks for under reporting their stressed portfolios and enforced stricter guidelines.

Das on Monday said a time-bound resolution of non-performing assets would help improve credit flows.

He also said India's non-banking financial companies should show greater prudence in lending.