There are two kinds of doctors. One sort diagnoses the ailment, prescribes medicines and waits for the patient to get better. The other prefers to experiment and, in the process, often ends up spending more time in dealing with the side effects of the drugs he has administered.
Mumbai: At one Indian bank—Central Bank of India—bad loans exceeded 6% of total advances in the quarter ended 30 June. At six more banks, four of which are majority-owned by the government, gross non-performing assets (NPAs) were above 5% of advances. Gross NPAs of five other banks, all of them in the public sector, made up more than 4% of their loan books in June.
In early morning trading on Tuesday, the yield on the benchmark 10-year bond touched 9.49%. At this pace, it might cross double digits in a day or two—a level last seen in May 2001.
Gross bad assets of at least one bank—Central Bank of India—exceeded 6% of its advances in the June quarter. For another six banks, four of which are majority owned by the government, they are above 5% of loans. Gross bad assets of five more banks, all of them are in the public sector, in June have been more than 4% of their loan books.
The benchmark 10-year bond yield touched 9% on Monday at 12.30pm, a level last seen on 25 August 2008. The banks will have to make good the depreciation in their bond portfolio by setting aside money.
What does freedom mean for the Rs.75 trillion Indian banking industry? Or, for that matter, the 78-year-old Indian central bank? All interest rates, both for loans and liabilities, are free. Public sector banks, which roughly account for 70% of the industry, are board-driven and the government is their majority owner.
The impact of a depreciating local currency is evident on India’s wholesale price inflation that rose to 5.79% in July, the fastest pace in five months. The two contributing factors to the rise in inflation are higher food prices and costlier imports.
The rupee did not care much for finance minister P. Chidambaram’s measures to prop it up. The local currency opened weaker on Tuesday.