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India has a higher gross non-performing assets-to-gross advances ratio than other emerging markets like Indonesia, Korea, Mexico and Turkey. The ratio – which is a measure of the overall quality of loans made by the country’s banks – was 3.6 per cent in India in 2011.
In comparison, it was just 1.6 per cent in Korea, 1.8 per cent in Indonesia, 2.4 per cent in Mexico and 2.7 per cent in Turkey.
Even China had a higher gross NPA to gross advances ratio of 1 per cent, while it was 2.4 per cent in Japan. But the ratio was higher in the case of developed economies like the USA and UK, which were in the grip of an economic slowdown.
But the capital to risk-weighted assets ratio, or capital adequacy, was lower in India than in these developed economies. This implies that Indian banks had less capital to tide over any shocks to their business than their counterparts in developed economies. What is more, it was also lower than it was in other emerging markets.
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