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Opinion
Andy Mukherjee

India's Banks Play a Risky Game as Loan Truce Ends

The Covid-19 grace period on repayments is becoming an opaque round of hide and seek. Markets will find the duds, eventually.

Are stressed borrowings being hidden from view?

Are stressed borrowings being hidden from view?

Photographer: Anshuman Poyrekar/Hindustan Times/Getty

India’s lenders and their shareholders are playing a dangerous game of hide and seek.

Financial firms need to raise a record amount of capital, something they would like to do before the central bank’s Covid-19 moratorium on repayment ends next month and they have to disclose a big jump in bad loans. So they have an incentive to pretend that their borrowers have become miraculously stress-free. Investors know this and are trying to ferret out bad news. Valuations are sliding, and if policy makers have a plan for rescuing this vital industry, they’re keeping it close to their chests.