IIPM PUBLICATION
Increased
economic activity and credit growth go hand in hand. India’s credit to GDP ratio has steadily increased from 10% in 1970 to over 40% in June 2006, compared to US, UK, China, Malaysia and Japan where the ratio is over 100%. Acceleration in credit poses both opportunities and challenges for policy makers, as credit growth invariably leads to some erosion in credit quality. Decline in credit quality and concentration of credit in particular sectors have almost invariably lead to higher defaults in the developed nations. Gross NPAs of Indian banks are still relatively high at 5.2% of total advances, way above Mexico’s 2.4%, UK’s 2.2%, US 0.8% and Australia’s 0.3%. NPAs not only increase the risk of erosion of banks’ capital, but also restrict the further lending capacity of banks.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006, Arindam Chaudhuri's Initiative
Increased
economic activity and credit growth go hand in hand. India’s credit to GDP ratio has steadily increased from 10% in 1970 to over 40% in June 2006, compared to US, UK, China, Malaysia and Japan where the ratio is over 100%. Acceleration in credit poses both opportunities and challenges for policy makers, as credit growth invariably leads to some erosion in credit quality. Decline in credit quality and concentration of credit in particular sectors have almost invariably lead to higher defaults in the developed nations. Gross NPAs of Indian banks are still relatively high at 5.2% of total advances, way above Mexico’s 2.4%, UK’s 2.2%, US 0.8% and Australia’s 0.3%. NPAs not only increase the risk of erosion of banks’ capital, but also restrict the further lending capacity of banks.For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006, Arindam Chaudhuri's Initiative
No comments:
Post a Comment