Signs India's State-Owned Banks Are In Trouble

http://www.businessinsider.com/indias-state-owned-banks-are-in-trouble-2012-8

A rabble of public-sector walking dead, from Air India to local electricity boards, bleed cash yet still get access to state-owned banks.

And a boom in infrastructure projects, from roads to power stations and airports, is being paid for with debt.

Some of these projects are now in trouble because of red tape and a slowing economy.

All of this fuels concern that India has a bigger bad-debt problem than the rather stable level of banks’ official "non-performing" loans suggests.

Such restructured loans were $43 billion in March. That is just 2% of India’s GDP, and as a proportion of all loans far below the level in previous Asian crises, or in India in the early 1990s, when bad loans reached a quarter of the total. It is also well below the ratio of dud debts that some say is festering in China’s banks. But pockets of rot can wreak havoc. Write-downs by America’s banks since 2007 amount to only 5% of its GDP. Restructured loans are still rising in India (see chart). And the country runs the risk of Spanish disease, in which evidence of rising zombie debt is cheerfully dismissed until it is too late.