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In a first since 2015, bad bank loans eased 0.4% to Rs 9.46 trn at Sept-end

RBI's clean-up drive, tighter rules helping; overdue loans also ease in September

Reuters  |  Mumbai 

Union Finance Minister Arun Jaitley is expected to address the two-day conclave at the State Bank of India (SBI) Academy in Gurugram

India's stock of shrank slightly in the quarter to September last year, the first pullback since a drive to clean up record levels of began in 2015 and signalling that tighter rules and a new may be starting to show results.

- which include as well as restructured or rolled-over loans - eased 0.4 per cent from three months earlier to 9.46 trillion rupees ($148.3 billion) at the end of September, according to unpublished central bank data reviewed by Reuters.

The last data seen by Reuters showed soured loans hit a record 9.5 trillion rupees as of end-June last year, accounting for 12.6 percent of total loans. The new data shows that the ratio declined to 12.2 per cent in the period to end-September.

That would be the first decline in soured assets since at least 2015, according to quarterly data collected by Reuters. On an annual basis, stressed assets have risen steadily since the year to March 2006.

have seen their soured loans nearly double in the past four years as a prolonged economic slowdown took its toll on the ability of companies to repay debt.

Profligate lending and poor due diligence have also been blamed for the surge.

In late 2015, the (RBI) began a major asset quality review amid allegations that were hiding the extent of the bad debts on their books.

The central bank last year ordered to push some 40 of the country's biggest corporate defaulters into bankruptcy proceedings through greater powers given to it as part of the government's banking sector reforms programme. The government has also announced a $33 billion of the state-run that account for the bulk of the soured loans.

"The view is that the stressed assets ratio will not go up sharply from current levels. We expect asset-quality parameters to stabilise in due course before moving lower," said Jobin Jacob, an associate director at

"The capital that has come in is a big positive and will bolster state banks' ability to absorb losses that are likely to ensue from loan resolution", Jacob said, adding the rating agency would be watching the asset quality closely.

The government on Wednesday announced the first tranche of the capital injection programme, pledging to inject nearly $14 billion into 20 state by March.

at the country's 21 state-run were 8.25 trillion rupees at end-September, or 16.2 percent of their total loans, according to the data received through a right-to-information request.

had 4.65 per cent of their total loans classified as stressed amounting to 1.06 trillion rupees as of Sept. 30. Bad loans at foreign banks' Indian operations amounted to 148.52 billion rupees, or 4.2 percent of their total loans.

Loans that had been overdue for between 60 days and 90 days, and are at the highest risk of default, also eased to 1.53 trillion rupees as of end-September, from 1.63 trillion rupees at end-June, the data showed.

First Published: Fri, January 26 2018. 08:12 IST