Advertisement
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".

Advertisement - Article continues below

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."

Advertisement
Advertisement

Recommended

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
Emerging markets: buy when the news is bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
UK house prices hit a new record high – can it last?
House prices

UK house prices hit a new record high – can it last?

Despite the pandemic, UK house prices have hit a new high. John Stepek looks at what’s driving the surge in prices, and what it means for house prices…
7 Aug 2020