India?s non-performing loan ratio, which increased from a low of 2.3% in 2011 to around 4% in 2013, coupled with similar pressures in China and Korea, has put economies and financial systems at risk, Moody?s Analytics, a division of Moody?s Corporation, said in a report on Tuesday.
?The government has encouraged lending in an effort to support development of the country?s inadequate infrastructure, but although these intentions are positive, delays to projects and other regulatory issues have weighed on revenues, and thus, developers? ability to repay debt,? the report added.
According to RBI data, public sector banks account for about 75% of total lending and the report said that public sector lenders are behind the increase in bad loans.
The report explained that some Asian economies are likely to experience an environment of slower GDP growth and higher interest rates in coming years, which will make debt harder to repay.
?An increase in bad loans is also likely after Asia?s credit binge in recent years, which poses risk to the region’s banking systems and real economies,? Moody’s added.
Gross NPAs of 40 listed banks rose to R2.43 lakh crore, an increase of 35.2% at the end of December 31, 2013, against R1.79 lakh crore at the end of March 31, 2013.
In the report, Matthew Circosta, economist, Moody’s Analytics, compares India’s NPAs with other Asian economies like Korea and China. Korea?s non-performing loan ratio rose to a three-year high of 1.8% in 2013, driven by an increase in corporate defaults.
Debt problems are most acute in the shipbuilding sector, where weaker global trade flows since 2008 have hampered revenues. In China, non-performing loans have increased at the same rate as credit growth in recent years, leaving the reported non-performing loan ratio steady at 1%.