India's Banks Play a Risky Game as Loan Truce Ends
The Covid-19 grace period on repayments is becoming an opaque round of hide and seek. Markets will find the duds, eventually.
Are stressed borrowings being hidden from view?
Photographer: Anshuman Poyrekar/Hindustan Times/Getty
India’s lenders and their shareholders are playing a dangerous game of hide and seek.
Financial firms need to raise a record amount of capital, something they would like to do before the central bank’s Covid-19 moratorium on repayment ends next month and they have to disclose a big jump in bad loans. So they have an incentive to pretend that their borrowers have become miraculously stress-free. Investors know this and are trying to ferret out bad news. Valuations are sliding, and if policy makers have a plan for rescuing this vital industry, they’re keeping it close to their chests.