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Central Bank Warns of Reversal in India’s Bad-Loan Clean Up

  • Sees gross bad-debt ratio rising to 9.9% by September 2020
  • Says contagion risks from shadow banking sector have eased
A pedestrian passes the Reserve Bank of India headquarters in Mumbai.
A pedestrian passes the Reserve Bank of India headquarters in Mumbai.Photographer: Dhiraj Singh/Bloomberg

India’s financial regulator predicted that an improvement in banks’ bad-loan ratios will reverse, as a slowing economy hurts borrowers’ ability to repay.

In its latest Financial Stability Report released Friday, the Reserve Bank of India said soured debt at Indian lenders will rise to 9.9% of total credit by September 2020, after dropping the most in 15 years to 9.3% a year earlier. It had previously forecast 9% in March.