India Has No Plans To Waive Bad Corporate Debt

The Indian government wants banks to handle issues surrounding bad corporate debts and has no plans to waive the loans, according to reports Friday (Dec. 29) in the Economic Times of India.

“No proposal for waiver of corporate loan is under consideration of the government,” stated Minister of State for Finance Shiv Pratap Shukla. The comment came in written format in response to a question posed by the nation’s Lok Sabha.

Policymakers had asked Shukla about his reaction to nationwide strikes among bank employees following increased bank charges, industry consolidation and waiver of corporate loans. The publication cited data from the Reserve Bank of India (RBI) that found the majority of bad loans held at private sector banks come from corporate borrowers.

India enacted its new Insolvency and Bankruptcy Code last year. Reports have since said more than 2,400 cases have been filed before the National Company Law Tribunal.

Reports last October said bad loans hit $145.56 billion on lenders’ balance sheets, based on data compiled at the end of last June by Reuters. The figure is a 4.5 percent increase for the six-month period ending June 30.

“On the corporate side, we think it’s a recognition cycle [that] is nearing an end,” said Moody’s Investor Service senior analyst Alka Anbarasu in an interview.

Elsewhere, bad corporate debt has sparked concerns among analysts and regulators. Reports last October said the European Central Bank would ask banks to increase their capital reserves to cover rising bad debts. As of Jan. 1, 2018, the banks have two years to set funds aside to cover 100 percent of newly classified, nonperforming, unsecured debt.

In China, bad corporate debt levels accounted for more than 150 percent of the country’s gross domestic product (GDP), according to Seeking Alpha reports in 2016. In the U.K., bad debt among small business borrowers jumped 70 percent, according to research from Bibby Financial Services published last July.