Indian public banks to struggle in loan clear-up

Author: Brian Yap | Published: 11 Jul 2016

The Indian government’s crackdown on non-performing assets (NPAs) has been criticised by market participants, who believe that meeting the deadline imposed on state lenders will be a daunting task.

The Reserve Bank of India (RBI) has issued an ultimatum to all public banks to remove their growing volumes of bad loans from their debt portfolios by March 31 2017, when the current fiscal year ends.

But counsel in India argue that the rising pile of soured loans has been years in the making, and that it is a huge challenge for large NPAs-laden public banks to complete a clean-up within a one-year timeframe.

"The question is what do banks need to do," said Devidas Banerji, partner at Khaitan & Co. "Do they need to be more perceptive and innovative themselves on the question of liability management? What steps do banks need to take to better manage their liability in...