Corporate Vulnerabilities in India and Banks' Loan Performance

December 19, 2014

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Peter Lindner, and Sung Eun Jung. Corporate Vulnerabilities in India and Banks' Loan Performance, (USA: International Monetary Fund, 2014) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The financial performance of India's corporate sector has been under pressure since the Global Financial Crisis. Balance-sheet data on a large cross-section of Indian non-financial corporates show that the growth in their leverage over the last 15 years has been associated with a notable increase in the vulnerabilities of firms carrying high interest payment burdens. Gauged by the debt carried by the most vulnerable component of firms, the Indian corporate sector’s vulnerability to severe systemic shocks has increased to levels not seen since 2001. Progress on the macroeconomic front, together with improved credit appraisals and stricter impairment standards on the bank side, will be critical to help India's banks resume their role as economic growth drivers.

Subject: Bank credit, Banking, Commercial banks, Economic sectors, Financial institutions, Loans, Money, Public sector, State-owned banks

Keywords: Bank, Bank asset quality deterioration, Bank credit, Bank-corporate dependencies, Commercial banks, Corporate performance, Financial crisis, Firm resilience, Global, Gross NPAs, IMF staff calculation, India, Leverage, Loans, Primary market equity issuance, Public sector, Recapitalization cost, Return on equity, State-owned banks, Worsening performance, WP

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/232
Stock No:

WPIEA2014232
ISBN:

9781498334235
ISSN:

1018-5941

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