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Tuesday, August 28, 2012

ICICI Bank CEO Chanda D Kochhar denies bad loan risks

Chanda D Kochhar, CEO of ICICI Bank, dismissed concerns about rising bad debts at Indian lenders, saying the problems of the financial sector are being exaggerated.

"Asset quality problems for the banking industry are not as acute as perceived," Kochhar, head of India's second-largest bank, said. "Temporary cash-flow problems in projects with gestation period of as much as 15 years don't make it a bad loan."

Kochhar's view differs from the Reserve Bank of India, which in a June 28 report said the condition of lenders is likely to worsen this year on an increase in soured credit.

A slowing economy may lead to a rise in bad loans, said Hatim Broachwala, an analyst at Karvy Stock Broking, in Mumbai. The $1.8-trillion economy may expand 6.5% in the year ending March, the weakest pace in a decade, according to the central bank. Delinquent loans may jump to as much as 4.6% of total advances in the year ending March 31 under a "severe-risk scenario," according to the RBI's report.

"Bad loans are a function of the economy and if there is no improvement in the sentiments in coming quarters, bad loans could go up for the banking system as a whole," said Broachwala.

"We are yet to see any concrete improvement in those sentiments." India's economy expanded 6.5% in the year ended March 31.

Source: EconomicTimes


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