Deterioration of assets and slowing credit growth are worsening India’s banking profit visibility.
Gross bad debt among India’s banks is rising and Credit Suisse says that by 2014 bad loans will rise to 10% from current estimate of 7.8%.
Bad debt is particularly problematic in the government owned banks while such metric declined in the private banks.
State Bank of India, for example, saw its bed debt rise to 4.6% in Q4, up from 3.2%.
Some of these bad loans are being restructured but restructuring does not solve the underlying problem and simply postpones the problem.
Loan growth, while positive, is now seen going up 16%, revised from 18%, itself revised from 23%.
Over the centuries, plundering gold was often the only reason to wage wars. For much of the 20th century, if they had to steel any metal, organized crime syndicates also plundered gold. Once into the new century, however, organized mob moved on to copper having their posse roam dilapidated cities striping the metal from abandoned homes or, like in Dallas, yanking it out of the new construction.
The common incentive to the metals plunder has been its rising price.
But in India, as we learn, the mob is moving on to coal.
Dubbed “black diamond” India Today elaborates:
As soon as a coal laden train leaves the siding rack, the villagers are tipped off. As the train moves through the jungles, it is stopped by a group of people and the theft begins. The villagers come prepared with gunny bags and baskets to carry their loot. Uncovered bogies make the process easy. The stolen coal is then loaded on to tractors and secured in godowns by the coal mafia.
The paper says that thousands make a living thieving the coal with millions of tons of coal being stolen every year.
“Coal theft has become a sort of occupation in Jharkhand, with mafias calling the shots and the government preferring to play a mute spectator,” writes India Today.
India is facing a coal shortage and the coal unions are threatening a strike unless miners get a better pay and the government ban coal imports.
Head of commodity research at the Australia and New Zealand Banking Group (ANZ), Mark Pervan, said that India may triple coking coal imports by 2015.
Pervan estimates that India’s coking coal imports will go from current 30 million tons to 90 million tons by 2015 surpassing Chinese coking coal imports. By comparison, China coking coal imports may be at most 70 million tons by 2015.
The coking coal demand will be driven by India’s growth in steel output which is seen to grow at 10% clip for next 10 years.
“I think India will become a bigger importer than Japan and China, the current leaders in importing coking coal,” Pervan is quoted as saying.
Pervan sees coking coal prices at an elevated level for some time due to this rising demand.