Record Defaults in India Worsen Nation's Bad Asset Pain

Nonpayment on bonds, syndicated loans already quadrupled this year


Defaults on bonds and syndicated loans of Indian companies are at a record of almost $2 billion so far this year, compared with $494 million for all of 2016, according to data compiled by Bloomberg. State Bank of India, the nation’s largest lender by assets, surprised investors this month when it reported bad loans had risen to 10 percent after the acquisition of smaller lenders. The government’s injection of funds in August into a state-owned bank at risk of missing a coupon payment is beneficial for bondholders but creates a moral hazard by taking pressure of lenders to manage their capital pro-actively, according to Fitch Ratings.

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