Rajan flags concerns over corporate risks
Reserve Bank of India (RBI) Governor Raghuram Rajan has called for closer monitoring of the threat to banks from weakening corporate performance and debt-servicing capabilities of leveraged business groups. “Corporate sector vulnerabilities and the impact of their weak balance sheets on the financial system need closer monitoring,” Rajan said, in his foreword to the Financial Stability Report (FSR) released on Wednesday by RBI on behalf of the Financial Stability Development Council (FSDC). PROJECTION OF SYSTEM LEVEL GNPA RATIOS All signs point to rising stress on bank books Share of large firms in bad loans going up Loans to infrastructure, steel, construction pose risk Banks resilient to withstand shocks backed by capital India Inc’s overall ability to repay debt, as measured by earnings relative to interest owed, improved in the months to September, but the report warned bad debt was becoming more concentrated among large, highly-leveraged borrowers. The pr...