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India central bank deputy governor says lenders need to improve asset quality

[MUMBAI] Reserve Bank of India Deputy Governor R Gandhi said the central bank has been warning lenders on the need to improve asset quality, reinforcing concerns about the bad loans that continue to weigh on earnings in the sector.

Most Indian lenders that have reported results for the fiscal third-quarter to end-December, have seen their bad loan ratios widening.

In some cases loan accounts that had already been restructured turned sour, resulting in so-called slippage.

"Asset quality has always been a concern after the financial crisis that has happened," Mr Gandhi told reporters in Mumbai. "We have been continuously cautioning banks about slippage of stressed assets and we have been guiding banks in recovering (the bad debt)."

Stressed assets in the Indian banking system, including bad and restructured loans, are estimated at more than 6 trillion rupees (US$96.7 billion), or more than a tenth of the total loans.

REUTERS