RBI Governor Promises New Regulations Against Defaulters

News: Lending departments at India ' s banks have begun to take tougher action against defaulting clients. In addition, Raghuram Rajan, governor of the Reserve Bank of India (RBI) , has pledged to give additional powers to banks to resolve such situations, the Economic Times reports. Banks are confident that new measures will reduce the effect of non-performing assets on quarterly profits.

BMI View: Our core view on the Indian economy sees a cyclical upturn in the coming years, with full-year real GDP growth projected to rebound to 5.5% this fiscal year (FY2013/14 [April-March]) from an estimated growth rate of 5.0% in FY2012/13. Having said that, given the uncertain environment on the back of the continued presence of the country's lingering twin deficits - high current account and budgetary shortfalls - we believe that any rebound in growth is likely to be muted, without the historical vigour witnessed in previous recoveries. In this article, we look at indicators of banking sector activity, and what they suggest about the nature of India's impending growth bounce. With regards to our projections for the banking sector's prospects this year, we are forecasting total asset growth to rebound to 20.0% this year, from the slowdown to 13.2% growth in 2012.

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Geography: India, India, India, India

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