NPLs: fine-tuning of India's bankruptcy code still needed

Author: Karry Lai | Published: 24 Apr 2018

India's financial system doesn't have enough capital to feed its non-performing loan (NPL) problem. The Indian government is pining hopes on the new Insolvency and Bankruptcy Code (IBC) to help solve the issue, which has spiraled out of control in the past few years as lenders, especially state-owned banks, have been giving out easy loans as far back as the financial crisis.

The issue of bad debt has ballooned as India steps up its infrastructure development programme, fueling funds into capital-intensive sectors such as airports, ports, highway construction and power. According to Alka Anbarasu, vice president and senior analyst at Moody's, loans have been concentrated in large Indian companies and the Code has given more power to lenders to go after those who are unable to repay debts. 
Little thought has been given to the risk profile of borrowers: NPL figures have grown nearly 20 times from INR53,917 crore ($8.1...