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Corporate Vulnerabilities in India and Banks' Loan Performance

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  • Peter Lindner
  • Sung Eun Jung

Abstract

The financial performance of India's corporate sector has been under pressure since the Global Financial Crisis. Balance-sheet data on a large cross-section of Indian non-financial corporates show that the growth in their leverage over the last 15 years has been associated with a notable increase in the vulnerabilities of firms carrying high interest payment burdens. Gauged by the debt carried by the most vulnerable component of firms, the Indian corporate sector’s vulnerability to severe systemic shocks has increased to levels not seen since 2001. Progress on the macroeconomic front, together with improved credit appraisals and stricter impairment standards on the bank side, will be critical to help India's banks resume their role as economic growth drivers.

Suggested Citation

  • Peter Lindner & Sung Eun Jung, 2014. "Corporate Vulnerabilities in India and Banks' Loan Performance," IMF Working Papers 2014/232, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2014/232
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    References listed on IDEAS

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    1. International Monetary Fund, 2009. "India: Selected Issues," IMF Staff Country Reports 2009/186, International Monetary Fund.
    2. Kiichi Tokuoka, 2012. "Does the Business Environment Affect Corporate Investment in India?," IMF Working Papers 2012/070, International Monetary Fund.
    3. Leandro Medina, 2012. "Spring Forward or Fall Back? The Post-Crisis Recovery of Firms," IMF Working Papers 2012/292, International Monetary Fund.
    4. Ms. Hiroko Oura, 2008. "Financial Development and Growth in India: A Growing Tiger in a Cage?," IMF Working Papers 2008/079, International Monetary Fund.
    5. International Monetary Fund, 2014. "India: Selected Issues," IMF Staff Country Reports 2014/058, International Monetary Fund.
    6. Ms. Meral Karasulu & Mr. Matthew T Jones, 2006. "The Korean Crisis: What Did We Know and When Did We Know It? What Stress Tests of the Corporate Sector Reveal," IMF Working Papers 2006/114, International Monetary Fund.
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    Cited by:

    1. Gülcan Yildirim Güngör & Merve Demirbaş Özbekler & Tuba Pelin Sümer, 2017. "Corporate sector financials from financial stability perspective," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Uses of central balance sheet data offices' information, volume 45, Bank for International Settlements.
    2. Manjusha Senapathi & Saptarshi Ghosal, 2016. "Modelling Corporate Sector Distress in India," Working Papers id:11540, eSocialSciences.
    3. Ila Patnaik & Shalini Mittal & Radhika Pandey, 2019. "Examining the Trade-Off Between Price and Financial Stability in India," Working Papers id:12979, eSocialSciences.
    4. Kara, Alper & Hacihasanoglu, Yavuz Selim & Unalmis, Deren, 2021. "Financial contagion and the role of firm characteristics," Finance Research Letters, Elsevier, vol. 38(C).

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