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Finance

Indian banks build $13bn war chest to battle bad loans

RBI asks lenders for preemptive fundraising as first recession in 41 years looms

Bank employees wait for customers at a loan fair in New Delhi in October 2019. Hit by pandemic, Indian banks are bolstering capital buffers to weather the increase in bad loans.   © Reuters

MUMBAI -- India's financial institutions are on a fundraising spree via debt instruments and equity offerings, as the new coronavirus pandemic threatens to turn loans into instruments of economic destruction.

The ratio of nonperforming assets to total advances could soar to over 12.5% by March 2021 from 8.5% as of end-March this year, prompting the country's central bank to push banks to raise reserve capital, which now totals over 1 trillion rupees ($13.4 billion).

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