Foreword
The distressed assets situation in India has gradually worsened
over the past few years. The stressed loans issue in banks has
resulted from a combination of factors including a)
undercapitalised projects; b) continued focus on expansion by
optimistic promoters who believed that India is decoupled from
global trends; c) undercapitalised banks leading to delayed
recognition of stressed situations and a consequent debt trap; and
d) policy paralysis.
Consequently, bad loans (NPAs + restructured loans) at Indian
banks have jumped to ~INR8 trillion representing ~11.5% of gross
advances as of March 2016, and things are likely to get worse. This
follows an official review in the last quarter of FY2016 by Reserve
Bank of India, when India's banking regulator started a
bank-by-bank review of stressed accounts as part of an asset
quality review (AQR). For all the past few years of growth and
reform, banks in India have continued rolling over troubled loans
or
