StatsGuru: 19-November-2012

The question of corporate debt is taking on new urgency, as it becomes increasingly clear that reversing an investment slowdown will become difficult when so many major companies are debt-laden. Table 1 reveals the private companies with the most consolidated total debt for last financial year. Most of these, clearly, are in infrastructure (including telecom) or heavy industry.

Unsurprisingly, as Table 2, reveals, infrastructure accounts for almost a third of bank credit. Metals are the second-largest destination for credit.

Indeed, it is important to note it appears that the amount of bank credit available may not be the real problem for the investment slowdown. As Table 3 shows, the deployment of bank credit to the industrial sector has almost doubled in the past three years. Bank liquidity is clearly not the only problem. Nor is it inexhaustible. As Table 4 shows, it has been steadily growing for three years – but the growth rate of bank deposits has always stayed well below that of bank credit. This is an unsustainable situation.

 

The question of what happens to this ample credit is also of concern. As Table 5 points out, non-performing assets are at dangerous levels, with the State Bank of India alone dealing with Rs 0.5 lakh crore worth of NPAs. But corporate restructuring, should also be a worry. As a ratio of total advances, it has increased considerably in three years, as Table 6 shows – but has almost doubled for public-sector banks. (Click for table & graphs)

And the main driver of this increase is industry, and particularly large-scale industrial borrowers. Indeed, as Table 6 also shows, the ratio of restructured advances to gross advances for medium- and large-scale industrial borrowers has reached a startling 9.34 per cent.