Features

India’s banking crisis deepens

Bad loans are rising at India's fourth-largest private bank by assets and the lender needs fresh capital to plug the gap. And it's not alone.

Yes Bank "could use a helping hand", says Una Galani on Breakingviews. Bad loans at the private-sector bank the fourth-largest in India by assets are rising and the lender needs fresh capital to plug the gap. But with its shares down by 80% this year, investors are reluctant to step forward. And India has "no up-to-date framework on how to deal with troubled financial institutions", so it's unclear how the policymakers will resolve the issue, even though it's certain that "allowing Yes Bank to flail would be the worst decision".

Yes is "a particularly marked example", but it is "not alone in its troubles", says The Economist. "India's banks are obviously faltering" as they deal with "the overhang from a splurge of bad lending years ago" much of it to struggling property developers, industrial groups and to non-bank lenders (several of which have failed over the past year). In one example, police are investigating an alleged "vast lending fraud" at Punjab & Maharastra Co-operative Bank (PMC), a small lender that had 70% of its loan book tied to one bankrupt property developer.

The latter marks a new phase in the crisis because it's the first deposit-taking institution to fail, says Andy Mukherjee on Bloomberg. That could send savers fleeing to the most reliable banks, worsening the liquidity of weaker ones."PMC Bank is too tiny to pose a systemic threat, but a small dead canary in a coal mine is still a large warning sign."

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Beware the hidden risks when investing in emerging markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019

Most Popular

How the stamp duty holiday is pushing up house prices
Stamp duty

How the stamp duty holiday is pushing up house prices

Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb…
25 Sep 2020
The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020
Can Rishi Sunak’s winter plan save the UK economy?
UK Economy

Can Rishi Sunak’s winter plan save the UK economy?

With his Winter Economic Plan, chancellor Rishi Sunak is hoping to support the economy through the dark months ahead as restrictions tighten again. Jo…
25 Sep 2020