A day after lowering India's growth forecast for 2017, the International Monetary Fund (IMF) has said that a combination of weak banks and corporates leave India vulnerable to a tightening of the global financial conditions, it urged for more steps to ensure good capitalisation in public sector banks.
As per its recent study, Indian banking sector was vulnerable given that large segments have low profitability and have large problem loans. The international organization also found vulnerabilities in the country’s corporate financial positions, in view of their high leverage and risk profiles.
IMF though appreciated measures taken by the government to address the problems of the banking system, however said they are not sufficient to tackle the bad loans which rose to Rs 6.41 lakh crore at the end of March 2017 as against Rs 5.02 lakh crore a year ago.