Bad Loans at historic high

If you thought the RBI's only concern currently is poor credit growth that is not entirely true. In fact the quality of credit in the current system is much more of a worry. At the end of March 2013, the total value of restructured loans in Indian banking system crossed Rs 2.2 trillion! Restructured loans are not just the fallout of indiscriminate lending to priority sector, particularly agriculture. In fact most big ticket restructured loans are cases of genuinely poor credit quality assessment by the lenders. That is the reason not just public sector but several private sector lenders too have shown deterioration in credit quality. Thus while the banking sector is struggling to come to terms with historically high proport ion of bad loans, the RBI does not want them to get aggressively lenient on credit costs.

Data Source: RBI