$40 Billion Indian Loans At Risk of Default

Restructured loans are defaulting at a record rate at Indian banks amid forecasts the worst economic slowdown in a decade will deepen, according to the investment banking unit of the nation’s biggest lender.

As much as 20 percent of renegotiated credit in India’s banking system is now classified as in default, according to SBI Capital Markets Ltd. Such loans, which give borrowers a moratorium on payments, longer maturities or lower interest rates, more than doubled since 2009 to 2.5 trillion rupees ($40 billion) at the end of June, data from the Corporate Debt Restructuring Mechanism show.

Bad loans are rising as Goldman Sachs Group Inc. predicts India’s economy will grow 4 percent this fiscal year, after a 5 percent gain in the prior period that was the smallest since 2003. The yield on State Bank of India’s 9.95 percent rupee debt due 2026 rose 74 basis points this quarter to 9.54 percent, the most since the notes were issued in 2011. That on Bank of China Ltd.’s 2020 dollar bonds fell 57 basis points to 4.09 percent.

Bloomberg

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