India’s wobbly banking system

published 4 August 2017

Last month, a poll by ratings agency Moody's found that 70% of investors in Hong Kong see India's banking system as the most vulnerable in south and southeast Asia. "I wonder what the remaining 30% were smoking," says Andy Mukherjee on Bloomberg Gadfly.

The state of Indian lenders "depleted capital levels in state-run banks and an inability to shed soured corporate debt even in non-state-controlled ones" is revealed in their latest earnings. Bad debts now total $191bn and counting.

It's not all bad HDFC has built a "formidable retail franchise", for example, and is poaching the best corporate clients from struggling state-run lenders. Yet at least when state banks struggle, the government fires their CEOs, says Una Galani on Breakingviews.com.

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Private-sector banks Axis and ICICI "ran into trouble lending to sectors such as power and infrastructure, where companies overestimated demand and projects overran", but neither have fired top management. In the US, heads would have rolled. "Corporate leaders in India rarely get the chop and... shareholders seldom apply sufficient pressure to force change."

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.