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India must face up to bad debt menace

Rise in nonperforming assets threatens to derail economic growth

| India
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People queue to withdraw cash in Ahmedabad, India, on Nov. 27, 2016.   © Reuters

India, the world's fastest-growing large economy, is facing a financial double whammy. The value of nonperforming loans is high and rising, while the demand for credit is slowing, especially from the private sector, threatening to cut business investment and economic growth.

The value of banks' nonperforming assets rose to $120 billion in September, accounting for 9.1% of their aggregate loan portfolios, from 7.6% in March 2016. Overall stressed assets, including restructured loans, rose to 12.3%. State-owned banks performed even less well, with stressed loans climbing to 15.8%. Bank credit grew just 5.1% in the year to Dec. 23, the lowest in two decades.

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