Indian Bank Risk Rises on Sour Loans as Profitability Declines

Indian Bank Risk Rises on Sour Loans as Profitability Declines

The risk to India’s banking industry rose in the six months through September as bad loans surged and profitability slumped, the central bank said. The average gross bad-loan ratio may increase to 4.6 percent of total lending by September 2014 in a “baseline scenario,” the Reserve Bank of India said in a financial stability report posted on its website today. The ratio advanced to 4.2 percent as of Sept. 30 from 3.4 percent in March, the report showed.Sour loans at Indian lenders are rising as the South Asian nation’s economy slows and clearances for various infrastructure projects are delayed, the RBI said. The central bank predicts India’s economy will expand 5 percent in the 12 months through March 31, the same pace as the last fiscal year, which was the weakest in a decade.

Profitability of the nation’s lenders, as measured by return on equity, fell to 10.2 percent as of Sept. 30, the lowest in at least five years, due to higher provisions for bad loans and the slowing pace of growth from loan income, the RBI report showed. Return on equity measures the profit generated with shareholders’ funds.

The S&P BSE Bankex index, a gauge of 12 banking stocks, has slumped 9.3 percent this year. State Bank of India, the nation’s largest lender, has lost 26 percent and ICICI Bank Ltd. has fallen 3.5 percent. The broader S&P BSE Sensex index has gained 9 percent.

To contact the reporter on this story: Anto Antony in Mumbai at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: