Bad Loans

The improvement comes after years of consolidation and balance-sheet repair, with the government now seeking to leverage RRBs' stronger financial position to expand rural credit, deepen financial inclusion, and improve operational efficiency.

Industry data gathered by the Association of ARCs in India showed that of the ₹60,000 crore put up for sale in Q1, ₹50,000 crore originated from state-run banks. While private sector banks put up ₹8,000 crore of bad debt for sale, the remaining ₹2,000 crore came from non-banks and mortgage lenders.

Private credit was initially an investment mainly for institutions. Then the industry made a big bet on retail investors.

Pressure is spreading beyond unsecured microfinance into what was once considered a relatively stable asset class, but lenders and analysts offer differing reasons for this.

They’ve had the highest non-performing asset (NPA) ratios in the past five years, and while their situation is improving, you’re probably better off looking elsewhere as an investor.

The going hasn’t been easy for India’s asset reconstruction companies, with the industry steadily shrinking in size.

While banks have seen big improvements in the level of bad loans, the government wants them to remain alert and not lose focus on the drive to chase bad loans.

Given pressures in the unsecured retail space, we believe banks with higher delinquencies are using it as a tactical tool to maintain their NPA ratio, obfuscating the true asset quality in the books, said Saswata Guha of Fitch Ratings.