India Inc’s debt servicing capacity at below par

The Reserve Bank of India (RBI) said in its financial stability report that the India Inc’s interest is burden at 9-year high. The Indian Corporations’ debt servicing capacity ismuch below the 2008-09 levels

Indian Corporate ability to service loans, has fallen drastically.

Real estate firms have the highest interest burden in the last four years. Sectors such as textiles, iron and steel, and construction have witnessed rise in the interest expenditure.

Non-performing assets (NPAs) outpacing credit growth and lower level of provisions, was likely to hit banks’ profitability in the coming quarter, added RBI.

RBI said, “The growth rate of gross NPAs at 45.7 per cent (year-on-year) as in end-September 2012 outpaced that of gross advances during the same period, highlighting the rising concerns on asset quality.”

 

According to RBI report, gross NPA for all banks rose sharply to 3.6 per cent of advances as in end-September, from 2.9 per cent six months ago, while net NPA ratio increased to 1.7 per cent of advances from 1.2 per cent. The share of public sector banks in NPA and debt restructuring was higher.

 

Loans that are not serviced for more than 90 days are termed as NPAs and banks have to make provisions for these.

 

Source – Business Standard