India has the highest level of non-performing assets (NPA) among BRICS countries and is ranked fifth on a list of countries with the highest levels of NPAs, a report by CARE Ratings revealed.
The only countries ranked higher than India on the list are Greece, Italy, Portugal, and Ireland. All these countries, along with Spain, are commonly referred to as PIIGS, and have been victims of sovereign debt crises in recent years.
Spain is the only PIIGS country ranked lower than India on the list, with an NPA ratio of 5.28 percent. At 9.85 percent, India’s NPA ratio is over 400 basis points higher.
In its report, CARE Ratings said that ‘the seriousness of the NPA problem can be gauged by the absolute level of impaired assets in the system. Ever since the RBI had spoken of asset quality recognition (AQR) in 2015, there was an increase in the pace of recognizing these assets’.
The rating agency also said that cleaning up bad loans from the system would be completed by March 2018 and any further rise in NPAs after that could be stemming from factors other than the ones identified by banks.
The report classified countries into four categories – those having very low levels of NPAs, those with low levels of NPAs, those with medium levels of NPAs and countries with high levels of NPAs.
Australia, Canada, Hong Kong, Republic of Korea and the United Kingdom were all found to have an NPA ratio of less than 1 percent and were classified in the first category.
The second category was largely made up of major economies from around the world like China, Germany, Japan, and the USA, all of who have NPA ratios of less than 2 percent.
The third category consisted of a few developed European countries but was largely constituted of fast-growing developing countries like Brazil, Indonesia, Thailand, South Africa and Turkey.