The IMF on Friday praised Pakistan's economic performance and agreed on the next steps, paving the way for the release of another portion of a $6 billion, three-year loan package.

Once the International Monetary Fund board gives the go-ahead, the Washington-based lender will provide $450 million to help right the South Asian nation's economy, on top of the $1 billion released in July.

"Despite a difficult environment, program implementation has been good, and all performance criteria for end-September were met with comfortable margins," IMF mission chief Ernesto Ramirez Rigo said in a statement.

The official, who led a team that spent two weeks in the country, pointed to signs of improving economic stability, including the move to a flexible exchange rate, and slowing inflation that is projected to fall under 12 per cent next year.

But he said more work was needed to target money laundering and on terror finance controls.

Approval of the first performance review of Pakistan's policy programme will also help unlock "significant funding from bilateral and multilateral partners."

Under the loan program, the government agreed to slash civil expenditure and freeze military spending while promising to substantially raise revenues to stem a yawning fiscal deficit, and pledging to collect 5.5 trillion rupees&nbsp;in taxes.

The IMF on Friday praised Pakistan's economic performance and agreed on the next steps, paving the way for the release of another portion of a $6 billion, three-year loan package.

The IMF on Friday praised Pakistan's economic performance and agreed on the next steps, paving the way for the release of another portion of a $6 billion, three-year loan package. Once the International Monetary Fund board gives the go-ahead, the Washington-based lender will provide $450 million to help right the South Asian nation's economy, on top of the $1 billion released in July. "Despite a difficult environment, program implementation has been good, and all performance criteria for end-September were met with comfortable margins," IMF mission chief Ernesto Ramirez Rigo said in a statement. The official, who led a team that spent two weeks in the country, pointed to signs of improving economic stability, including the move to a flexible exchange rate, and slowing inflation that is projected to fall under 12 per cent next year. But he said more work was needed to target money laundering and on terror finance controls. Approval of the first performance review of Pakistan's policy programme will also help unlock "significant funding from bilateral and multilateral partners." Under the loan program, the government agreed to slash civil expenditure and freeze military spending while promising to substantially raise revenues to stem a yawning fiscal deficit, and pledging to collect 5.5 trillion rupees in taxes.

International Monetary Fund approves $450 million loan to Pakistan as part of three-year package

The government is in talks with foreign lenders to provide as much as $14.5 billion in credit to millions of its small firms, two officials said, in a sign the country's banking system may not be robust enough to do the job on its own.

The government is in discussions with multiple foreign lenders, including Germany's state-owned development bank KfW Group, the World Bank and some Canadian institutions to extend lines of credit to small enterprises, one of the officials, who did not want to be identified, told Reuters.

KfW's India office confirmed the discussions, though the main focus was on credit lines to support small businesses'&nbsp;solar power generation. The talks were at an early stage, KfW said.

The World Bank's India spokesperson did not reply to an email seeking comment.

The official said the government plans to source up to 1 trillion Indian rupees of loans from foreign institutions because Indian banks were not in a position to provide enough capital for the small business sector, which is seen as critical to job creation.

“We are exploring, we are having discussions with various funding agencies if something can be done (for small and medium firms),” the second official said.

The officials did not provide full details of the discussions they are having with banks, or identify all those they are talking to, but said talks are at a very early stage.

India's micro, small and medium enterprise (MSME) ministry is discussing the proposal to pull in foreign banks with the country's ministry of finance, which will make a final call, the second official said.

The push for foreign loans comes on the heels of the Indian government's announcement earlier this month that it plans to borrow about 700 billion rupees by issuing overseas sovereign bonds.

India's 63 million firms in the micro, small and medium firm sector are responsible for more than a quarter of the country's manufacturing and services output, and must be re-energised for Prime Minister Narendra Modi's government to kick-start the economy.&nbsp;

Gross domestic product growth fell to a five-year low of 5.8 per cent&nbsp;in the January-March quarter, well below the 8 per cent-plus rates that the government is targeting.

But credit availability for small and medium firms, which also account for about 45 per cent&nbsp;of India's total exports, has worsened due to a liquidity crisis in the country's shadow banking industry that has seen big lenders struggling to remain solvent.&nbsp;

State-owned banks, which dominate the sector, have not been able to drive increased lending because they are burdened with more than $145 billion in bad loans.

This has led to a severe credit squeeze for smaller firms. They pay up to 17 per cent&nbsp;annual interest on loans from banks, while the shadow banks, which are also known as non-banking financial companies (NBFCS) can charge as much as 20 per cent.

Last month, a study by a Reserve Bank of India panel said the overall deficit in credit for the MSME sector is estimated at about 20 trillion rupees to 25 trillion rupees.&nbsp;

But lending to such firms can be risky as some lack proper financial information, such as historical cash flow data, which makes challenging for banks to assess the credit risks.

To mitigate such risks for foreign banks, the loans would be given sovereign guarantees and be routed through Indian government agencies such as the Small Industries Development Bank of India, the first official said. 
&nbsp;

The government is in talks with foreign lenders to provide as much as $14.5 billion in credit to millions of its small firms, two officials said, in a sign the country's banking system may not be robust enough to do the job on its own.

The government is in talks with foreign lenders to provide as much as $14.5 billion in credit to millions of its small firms, two officials said, in a sign the country's banking system may not be robust enough to do the job on its own. The government is in discussions with multiple foreign lenders, including Germany's state-owned development bank KfW Group, the World Bank and some Canadian institutions to extend lines of credit to small enterprises, one of the officials, who did not want to be identified, told Reuters. KfW's India office confirmed the discussions, though the main focus was on credit lines to support small businesses' solar power generation. The talks were at an early stage, KfW said. The World Bank's India spokesperson did not reply to an email seeking comment. The official said the government plans to source up to 1 trillion Indian rupees of loans from foreign institutions because Indian banks were not in a position to provide enough capital for the small business sector, which is seen as critical to job creation. “We are exploring, we are having discussions with various funding agencies if something can be done (for small and medium firms),” the second official said. The officials did not provide full details of the discussions they are having with banks, or identify all those they are talking to, but said talks are at a very early stage. India's micro, small and medium enterprise (MSME) ministry is discussing the proposal to pull in foreign banks with the country's ministry of finance, which will make a final call, the second official said. The push for foreign loans comes on the heels of the Indian government's announcement earlier this month that it plans to borrow about 700 billion rupees by issuing overseas sovereign bonds. India's 63 million firms in the micro, small and medium firm sector are responsible for more than a quarter of the country's manufacturing and services output, and must be re-energised for Prime Minister Narendra Modi's government to kick-start the economy. Gross domestic product growth fell to a five-year low of 5.8 per cent in the January-March quarter, well below the 8 per cent-plus rates that the government is targeting. But credit availability for small and medium firms, which also account for about 45 per cent of India's total exports, has worsened due to a liquidity crisis in the country's shadow banking industry that has seen big lenders struggling to remain solvent. State-owned banks, which dominate the sector, have not been able to drive increased lending because they are burdened with more than $145 billion in bad loans. This has led to a severe credit squeeze for smaller firms. They pay up to 17 per cent annual interest on loans from banks, while the shadow banks, which are also known as non-banking financial companies (NBFCS) can charge as much as 20 per cent. Last month, a study by a Reserve Bank of India panel said the overall deficit in credit for the MSME sector is estimated at about 20 trillion rupees to 25 trillion rupees. But lending to such firms can be risky as some lack proper financial information, such as historical cash flow data, which makes challenging for banks to assess the credit risks. To mitigate such risks for foreign banks, the loans would be given sovereign guarantees and be routed through Indian government agencies such as the Small Industries Development Bank of India, the first official said.

Government seeks to tap foreign lenders for loans to its small firms: Report

Shares of Jet Airways Ltd fell as much as 11.4% on Monday after media reports said a buyout offer from Middle Eastern carrier Etihad Airways was non-binding and might not guarantee a deal for the struggling Indian carrier.

Etihad, which owns an about 24% stake in Jet, submitted a bid for the airline, the unit of <a href="https://www.wionews.com/business-economy/state-bank-of-india-gets-sealed-bid-for-jet-airways-from-etihad-217565">State Bank of India</a> (SBI) overseeing the sale of the stricken carrier said on Friday.

That had raised hopes of a bailout for cash-strapped Jet, which has about $1.2 billion in bank debt.

The Mint newspaper said on Monday that Etihad wanted a commitment from banks on additional loans once it infuses equity into the company. The Middle Eastern carrier had not been able to find a local partner and lenders may need to take about 80% haircut on their outstanding loans to Jet Airways, the newspaper said, citing banking sources.

Shares of the carrier, which have tumbled almost 70% over the past year, were down 5% at Rs 144.3, as of 0445 GMT.

Jet, which owes vast sums to its lessors, pilots, fuel suppliers and other parties, stopped all flights from April 17 after its lenders refused to extend more funds to keep the carrier flying.

SBI also received two unsolicited, non-binding bids, the bank said on Friday.

Shares of Jet Airways Ltd fell as much as 11.4% on Monday after media reports said a buyout offer from Middle Eastern carrier Etihad Airways was non-binding and might not guarantee a deal for the struggling Indian carrier.

Shares of Jet Airways Ltd fell as much as 11.4% on Monday after media reports said a buyout offer from Middle Eastern carrier Etihad Airways was non-binding and might not guarantee a deal for the struggling Indian carrier. Etihad, which owns an about 24% stake in Jet, submitted a bid for the airline, the unit of State Bank of India (SBI) overseeing the sale of the stricken carrier said on Friday. That had raised hopes of a bailout for cash-strapped Jet, which has about $1.2 billion in bank debt. The Mint newspaper said on Monday that Etihad wanted a commitment from banks on additional loans once it infuses equity into the company. The Middle Eastern carrier had not been able to find a local partner and lenders may need to take about 80% haircut on their outstanding loans to Jet Airways, the newspaper said, citing banking sources. Shares of the carrier, which have tumbled almost 70% over the past year, were down 5% at Rs 144.3, as of 0445 GMT. Jet, which owes vast sums to its lessors, pilots, fuel suppliers and other parties, stopped all flights from April 17 after its lenders refused to extend more funds to keep the carrier flying. SBI also received two unsolicited, non-binding bids, the bank said on Friday.

Jet Airways shares slumps 11.4% after reports of Etihad's non-binding offer

In the first interest rate cut in 18 months, the RBI Thursday shed its hawkish stance to reduce policy rates in the maiden policy meeting under new Governor Shaktikanta Das, a move that may make home and other loans cheaper.

Coming just months ahead of the general elections, the move will help boost lending and support the government's efforts to boost a slowing economy after it last week unveiled an expansionary budget which included a Rs 75,000 crore cash dole to small farmers and income tax rebate to the middle class.

The Reserve Bank of India's six-member monetary policy committee (MPC) cut the repo rate by 25 basis points to 6.25 per cent as inflation continues to remain benign.

While four out of the six members, including Das, voted for a reduction in interest rate, all the six members unanimously favoured switch in stance to 'neutral' from 'calibrated tightening' adopted in October.

Emboldened by a slowdown in inflation which fell to 18-month low of 2.19 per cent in December and is expected to be in the range of 3.2-3.4 per cent in April-September to 3.2-3.4 percent - lower than previous RBI prediction of 3.8-4.2 per cent range, Das-led MPC weighed more concern about economic growth risks, paving the way for more rate cuts.

Besides repo rate, reverse repo was reduced to 6 per cent from 6.25 per cent.

Repo rate is the rate at which commercial banks borrow money from the RBI; while reverse repo rate is the rate at which RBI collects money from banks.

Das, who unlike his predecessor Urjit Patel is seen more amenable to government demands for boosting credit growth, said it was "vital to act decisively and in a timely manner to address the objective of growth once price stability as defined (in RBI's inflation-targeting mandate) is achieved."

A former bureaucrat, Das was appointed RBI Governor in December as Patel quit amid a debate over central bank's autonomy.

"The shift in stance from calibrated tightening to neutral provides flexibility to address, and the room to address, sustained the growth of India's economy over the coming months as long as inflation remains benign," he said.

"RBI's decision to reduce the repo rate by 25 basis point from 6.5 per cent to 6.25 per cent and change of stance to 'Neutral' will give a boost to the economy, lead to affordable credit for small businesses, homebuyers etc and further boost employment opportunities," Finance Minister Piyush Goyal said in a tweet.

RBI last hiked interest rates in August 2018 by 0.25 per cent. It came on back of a similar increase in June. These hikes were the first since January 28, 2014, when rates were hiked by a similar proportion to 8 per cent.

In the subsequent years, RBI cut the interest rate on six occasions. In its last revision, on August 2, 2017, rates were cut by 25 basis points to 6 per cent.

"Investment activity is recovering, but supported mainly by public spending on infrastructure," the MPC said in a statement. "The need is to strengthen private investment activity and buttress private consumption."

Falling food prices have been the main driver of the inflation slowdown, though the core measure -- which excludes food and fuel costs -- remains elevated.

The RBI kept GDP growth forecast unchanged at 7.4 per cent for the next fiscal year starting April 1, 2019.

"Headline inflation is projected to remain soft in the near term reflecting the current low level of inflation and the benign food inflation outlook," the MPC statement said, adding that it needs to be watchful of vegetable prices, oil prices, trade tensions, health and education inflation, financial market volatility and monsoon outcomes.

The rate cut is in consonance with achieving the medium-term objective of maintaining inflation at the 4 per cent level while supporting growth, it said.

The RBI expects GDP growth to be at 7.4 per cent in FY20, which is up from the 7.2 per cent estimated for FY19 by the CSO.

It will set up an internal working group to examine issues pertaining to agricultural loans, including regional disparity and extent of coverage. It also raised the limit for collateral?free farm loans to Rs 1.6 lakh from the current Rs 1 lakh in view of overall inflation and a rise in agriculture input costs.

The resolution said recent unusual pick-up in the prices of health and education services could be a one-off phenomenon, adding that the crude oil price outlook remains broadly the same as in the December policy.

With the cash dole for farmers, the central government budget deviated marginally from the fiscal consolidation path by announcing a slip in FY19 and pegging the gap at a higher 3.4 per cent for FY20.

The government is also expecting the RBI to deliver an interim dividend for the second year running at Rs 28,000 crore, which is likely to be taken up for discussion at RBI's next board meeting.

On the regulatory policies front, the RBI proposed relaxations on foreign borrowings by companies undergoing insolvency resolutions to pay off the local lenders, redefined bulk deposits as those above Rs 2 crore from the earlier Rs 1 crore, align risk weights of bank loans to NBFCs with their ratings rather than a blanket 100 per cent earlier and also harmonise categories of NBFCs.&nbsp;

In the first interest rate cut in 18 months, the RBI Thursday shed its hawkish stance to reduce policy rates in the maiden policy meeting under new Governor Shaktikanta Das, a move that may make home and other loans cheaper.

In the first interest rate cut in 18 months, the RBI Thursday shed its hawkish stance to reduce policy rates in the maiden policy meeting under new Governor Shaktikanta Das, a move that may make home and other loans cheaper. Coming just months ahead of the general elections, the move will help boost lending and support the government's efforts to boost a slowing economy after it last week unveiled an expansionary budget which included a Rs 75,000 crore cash dole to small farmers and income tax rebate to the middle class. The Reserve Bank of India's six-member monetary policy committee (MPC) cut the repo rate by 25 basis points to 6.25 per cent as inflation continues to remain benign. While four out of the six members, including Das, voted for a reduction in interest rate, all the six members unanimously favoured switch in stance to 'neutral' from 'calibrated tightening' adopted in October. Emboldened by a slowdown in inflation which fell to 18-month low of 2.19 per cent in December and is expected to be in the range of 3.2-3.4 per cent in April-September to 3.2-3.4 percent - lower than previous RBI prediction of 3.8-4.2 per cent range, Das-led MPC weighed more concern about economic growth risks, paving the way for more rate cuts. Besides repo rate, reverse repo was reduced to 6 per cent from 6.25 per cent. Repo rate is the rate at which commercial banks borrow money from the RBI; while reverse repo rate is the rate at which RBI collects money from banks. Das, who unlike his predecessor Urjit Patel is seen more amenable to government demands for boosting credit growth, said it was "vital to act decisively and in a timely manner to address the objective of growth once price stability as defined (in RBI's inflation-targeting mandate) is achieved." A former bureaucrat, Das was appointed RBI Governor in December as Patel quit amid a debate over central bank's autonomy. "The shift in stance from calibrated tightening to neutral provides flexibility to address, and the room to address, sustained the growth of India's economy over the coming months as long as inflation remains benign," he said. "RBI's decision to reduce the repo rate by 25 basis point from 6.5 per cent to 6.25 per cent and change of stance to 'Neutral' will give a boost to the economy, lead to affordable credit for small businesses, homebuyers etc and further boost employment opportunities," Finance Minister Piyush Goyal said in a tweet. RBI last hiked interest rates in August 2018 by 0.25 per cent. It came on back of a similar increase in June. These hikes were the first since January 28, 2014, when rates were hiked by a similar proportion to 8 per cent. In the subsequent years, RBI cut the interest rate on six occasions. In its last revision, on August 2, 2017, rates were cut by 25 basis points to 6 per cent. "Investment activity is recovering, but supported mainly by public spending on infrastructure," the MPC said in a statement. "The need is to strengthen private investment activity and buttress private consumption." Falling food prices have been the main driver of the inflation slowdown, though the core measure -- which excludes food and fuel costs -- remains elevated. The RBI kept GDP growth forecast unchanged at 7.4 per cent for the next fiscal year starting April 1, 2019. "Headline inflation is projected to remain soft in the near term reflecting the current low level of inflation and the benign food inflation outlook," the MPC statement said, adding that it needs to be watchful of vegetable prices, oil prices, trade tensions, health and education inflation, financial market volatility and monsoon outcomes. The rate cut is in consonance with achieving the medium-term objective of maintaining inflation at the 4 per cent level while supporting growth, it said. The RBI expects GDP growth to be at 7.4 per cent in FY20, which is up from the 7.2 per cent estimated for FY19 by the CSO. It will set up an internal working group to examine issues pertaining to agricultural loans, including regional disparity and extent of coverage. It also raised the limit for collateral?free farm loans to Rs 1.6 lakh from the current Rs 1 lakh in view of overall inflation and a rise in agriculture input costs. The resolution said recent unusual pick-up in the prices of health and education services could be a one-off phenomenon, adding that the crude oil price outlook remains broadly the same as in the December policy. With the cash dole for farmers, the central government budget deviated marginally from the fiscal consolidation path by announcing a slip in FY19 and pegging the gap at a higher 3.4 per cent for FY20. The government is also expecting the RBI to deliver an interim dividend for the second year running at Rs 28,000 crore, which is likely to be taken up for discussion at RBI's next board meeting. On the regulatory policies front, the RBI proposed relaxations on foreign borrowings by companies undergoing insolvency resolutions to pay off the local lenders, redefined bulk deposits as those above Rs 2 crore from the earlier Rs 1 crore, align risk weights of bank loans to NBFCs with their ratings rather than a blanket 100 per cent earlier and also harmonise categories of NBFCs.

RBI cuts key lending rate by 25%, loans likely to get cheaper

India will receive a loan to the tune of Rs 6668.46 crore from Japan for various development projects.

The loan will be used to develop phase two of the Chennai metro project, a dairy development project and a programme for <a href="http://www.wionews.com/india-news/india-can-provide-talented-people-for-our-development-japan-ambassador-on-wions-the-diplomacy-show-183858">Japan-India</a> cooperative actions towards Sustainable Development Goals in India.

Ambassador of Japan to India Kenji Hiramatsu and Additional Secretary, Department of Economic Affairs, Ministry of Finance, Government of India Dr.C.S. Mohapatra on Friday signed and exchanged notes here concerning the provision of three yen loan projects (total loan provision of up to JPY 105.497 billion, approximately INR 6,668.465 crore).

The first loan is for construction of a subway system in Chennai. It is expected that approximately 330 thousand people will use the 3rd line between Madhavaram Milk Colony Station and Sholinganallur Station (about 36.0 km) and it will reduce the travelling time between the two stations from the current two hours and fourteen minutes by automobile, to one hour and 8 minutes by 2029 (in 2 years after completion). 
 
It is also expected that approximately 760 thousand people will use the 5th line between Madhavaram Milk Colony Station and Chennai Mofussil Bus Terminus Station (about 16.0 km) and it will reduce the travelling time between the two stations from the current 46 minutes by automobile, to 30 minutes. 
 
This project is thus expected to contribute to the development of the regional economy and the improvement of the urban environment by easing traffic congestion. 
 
The second loan is for the improvement of income levels of dairy farmers in India. This project is to provide a loan to the Government of India for the enhancement of farmers' access to the modern distribution network, improvement of dairy machinery and distribution infrastructure, capacity building of dairy cooperatives in the several eligible states under the agreement between JICA, National Dairy Development Board, and Ministry of Agriculture and Farmers' Welfare. 
 
It is expected that 150 thousand dairy farmers will newly join dairy cooperatives, and the farmers' market will expand with modernized dairy product value chain. This project is thus expected to improve the income levels of dairy farmers by increasing the sales of milk and dairy products. 
 
The third loan is for the institution building and policy development related to Sustainable Development Goals (SDGs) in India This program is to contribute to achieving SDGs by 2030 through providing a loan for strengthening the implementation system and the policy framework related to SDGs in India, with a view to promoting SDGs in social development sector. 
 
For example, this program supports social sector development such as the enhancement of the ratio of pregnant women who have access to safe medical check-up from 64 per cent in 2016 to 75 per cent in 2019, and the ratio of population who are provided with enough amount of safe drinking water from 82 percent in 2016 to 90 percent in 2019 in least developed regions. 
 
Japanese ODA Loan commitment to India reached JPY 421.955 billion, approximately INR 26,671.776 crore and the all-time-high in FY2018.

India is the largest recipient country of Japanese ODA Loan in FY2018 as well as in FY2017 on the commission basis.

India will receive a loan to the tune of Rs 6668.46 crore from Japan for various development projects. The loan will be used to develop phase two of the Chennai metro project, a dairy development project and a programme for Japan-India cooperative actions towards Sustainable Development Goals in India.

India will receive a loan to the tune of Rs 6668.46 crore from Japan for various development projects. The loan will be used to develop phase two of the Chennai metro project, a dairy development project and a programme for Japan-India cooperative actions towards Sustainable Development Goals in India. Ambassador of Japan to India Kenji Hiramatsu and Additional Secretary, Department of Economic Affairs, Ministry of Finance, Government of India Dr.C.S. Mohapatra on Friday signed and exchanged notes here concerning the provision of three yen loan projects (total loan provision of up to JPY 105.497 billion, approximately INR 6,668.465 crore). The first loan is for construction of a subway system in Chennai. It is expected that approximately 330 thousand people will use the 3rd line between Madhavaram Milk Colony Station and Sholinganallur Station (about 36.0 km) and it will reduce the travelling time between the two stations from the current two hours and fourteen minutes by automobile, to one hour and 8 minutes by 2029 (in 2 years after completion). It is also expected that approximately 760 thousand people will use the 5th line between Madhavaram Milk Colony Station and Chennai Mofussil Bus Terminus Station (about 16.0 km) and it will reduce the travelling time between the two stations from the current 46 minutes by automobile, to 30 minutes. This project is thus expected to contribute to the development of the regional economy and the improvement of the urban environment by easing traffic congestion. The second loan is for the improvement of income levels of dairy farmers in India. This project is to provide a loan to the Government of India for the enhancement of farmers' access to the modern distribution network, improvement of dairy machinery and distribution infrastructure, capacity building of dairy cooperatives in the several eligible states under the agreement between JICA, National Dairy Development Board, and Ministry of Agriculture and Farmers' Welfare. It is expected that 150 thousand dairy farmers will newly join dairy cooperatives, and the farmers' market will expand with modernized dairy product value chain. This project is thus expected to improve the income levels of dairy farmers by increasing the sales of milk and dairy products. The third loan is for the institution building and policy development related to Sustainable Development Goals (SDGs) in India This program is to contribute to achieving SDGs by 2030 through providing a loan for strengthening the implementation system and the policy framework related to SDGs in India, with a view to promoting SDGs in social development sector. For example, this program supports social sector development such as the enhancement of the ratio of pregnant women who have access to safe medical check-up from 64 per cent in 2016 to 75 per cent in 2019, and the ratio of population who are provided with enough amount of safe drinking water from 82 percent in 2016 to 90 percent in 2019 in least developed regions. Japanese ODA Loan commitment to India reached JPY 421.955 billion, approximately INR 26,671.776 crore and the all-time-high in FY2018. India is the largest recipient country of Japanese ODA Loan in FY2018 as well as in FY2017 on the commission basis.

Japan gives Rs 6668.46 crore loan for developing projects in India

Finance Minister Arun Jaitley Monday defended loan write-offs by public sector banks, saying they do not lead to loan waivers and the exercise helps lenders clean up their balance sheets and achieve taxation efficiency.

He said public sector banks have recovered Rs 36,551 crore of bad loans or NPAs during April-June quarter of the current financial year as compared to Rs 74,562 crore recoveries made in the full 2017-18 fiscal.

Commenting on reports that the country's 21 state-owned banks wrote-off Rs 3.16 lakh crore of loans in four years of the BJP government and made recoveries of Rs 44,900 crore of written off loans, Jaitley in a Facebook blog said "technical write-offs" are resorted to by banks as per the Reserve Bank of India (RBI) guidelines.

"This, however, does not lead to any loan waiver. Recovery of loans continues rigorously by banks," he said. "In fact, the defaulting management of most insolvent companies have been removed under the Insolvency and Bankruptcy Code (IBC)."

Congress President Rahul Gandhi used the report to attack the government, saying demonetisation converted black money into white and Rs 3.16 lakh crore of loans were written off.

"Modi's India - For Common Man: Notebandi-line up and put your money in banks. All your details into Aadhar. You can't use your own money. For Crony capitalists: Notebandi-convert all your black money to white. Let's write off 3.16 lakh crore using common man's money," Gandhi said in a tweet.

Finance Minister Arun Jaitley Monday defended loan write-offs by public sector banks, saying they do not lead to loan waivers and the exercise helps lenders clean up their balance sheets and achieve taxation efficiency.

Finance Minister Arun Jaitley Monday defended loan write-offs by public sector banks, saying they do not lead to loan waivers and the exercise helps lenders clean up their balance sheets and achieve taxation efficiency. He said public sector banks have recovered Rs 36,551 crore of bad loans or NPAs during April-June quarter of the current financial year as compared to Rs 74,562 crore recoveries made in the full 2017-18 fiscal. Commenting on reports that the country's 21 state-owned banks wrote-off Rs 3.16 lakh crore of loans in four years of the BJP government and made recoveries of Rs 44,900 crore of written off loans, Jaitley in a Facebook blog said "technical write-offs" are resorted to by banks as per the Reserve Bank of India (RBI) guidelines. "This, however, does not lead to any loan waiver. Recovery of loans continues rigorously by banks," he said. "In fact, the defaulting management of most insolvent companies have been removed under the Insolvency and Bankruptcy Code (IBC)." Congress President Rahul Gandhi used the report to attack the government, saying demonetisation converted black money into white and Rs 3.16 lakh crore of loans were written off. "Modi's India - For Common Man: Notebandi-line up and put your money in banks. All your details into Aadhar. You can't use your own money. For Crony capitalists: Notebandi-convert all your black money to white. Let's write off 3.16 lakh crore using common man's money," Gandhi said in a tweet.

Arun Jaitley defends loan write-offs; says they don't lead to waiver

Farmers across the country said Friday that they had begun a 10-day nationwide strike. The farmers said they would not sell their produce in cities.&nbsp

In Punjab and Maharashtra, farmers were seen dumping vegetables, fruit, and milk on the streets.&nbsp

News reports said farmers in seven states &nbsp— Haryana, Rajasthan, Jammu and Kashmir, Madhya Pradesh, Maharashtra, Karnataka and Kerala — had joined the strike

Shivkumar Sharma, convenor of the Rashtriya Kisan Mazdoor Mahasangh, which is spearheading the strike in MP, however told PTI that farmers from 22 states had joined their protest.&nbsp

"The farmers' bodies have named the agitation as 'Gaon Bandh' (village blockade). The cultivators have been asked not to come to the markets in urban areas to sell their farm produce, including milk," PTI quoted Sharma as saying.&nbsp

Sharma added that on the last day of the protest — June 10 — the farmers' bodies will orgainse a "Bharat Bandh".&nbsp

The farmers are demanding a waiver of their loans, the right price&nbspfor their produce, and the implementation of the recommendations of the Swaminathan Commission.&nbsp

The farmers' protest is expected to soon hit essential supplies in cities.&nbsp

The farmers are demanding a waiver of their loans, the right price for their produce, and the implementation of the recommendations of the Swaminathan Commission

Farmers across the country said Friday that they had begun a 10-day nationwide strike. The farmers said they would not sell their produce in cities. In Punjab and Maharashtra, farmers were seen dumping vegetables, fruit, and milk on the streets. News reports said farmers in seven states — Haryana, Rajasthan, Jammu and Kashmir, Madhya Pradesh, Maharashtra, Karnataka and Kerala — had joined the strike Shivkumar Sharma, convenor of the Rashtriya Kisan Mazdoor Mahasangh, which is spearheading the strike in MP, however told PTI that farmers from 22 states had joined their protest. "The farmers' bodies have named the agitation as 'Gaon Bandh' (village blockade). The cultivators have been asked not to come to the markets in urban areas to sell their farm produce, including milk," PTI quoted Sharma as saying. Sharma added that on the last day of the protest — June 10 — the farmers' bodies will orgainse a "Bharat Bandh". The farmers are demanding a waiver of their loans, the right price&nbspfor their produce, and the implementation of the recommendations of the Swaminathan Commission. The farmers' protest is expected to soon hit essential supplies in cities.

Farmers begin 10-day nationwide strike, say will not sell produce in cities

China is using the strategy of giving credit and loans to countries across the world to become a global power with great influence, a top US intelligence official has said.

Daniel R Coats, Director of National Intelligence, told members of the Senate Armed Services Committee during a Congressional hearing said China was using a number of techniques that are far more than just the typical military land grab to increase its influence.

&quot;While China is modernising its military, is increasing its spending, most of it appears to be done for a deterrence purpose, rather than an aggressive purpose. They clearly have a strategy of using credit and loans to countries around the world, particularly in geo-strategic places, then combining it with some military capacity &mdash; South China Seas &mdash; their new base in Djibouti,&quot; Coats said.

&quot;We see that China is seeking, I think, to become a world power with great influence on a global basis. And they&#39;re using a number of techniques that are far more than just the typical military land grab that we see more likely with Russia, rather than China,&quot; Coats said.

He was responding to a question from Senator Angus King on the intelligence community&#39;s assessment of what China wants.

&quot;Are they moving toward military aggression and enlargement of their territory? Or are they looking more toward political and economic influence in the region?&quot; he asked.

&quot;It appears to be the latter,&quot; Coats said.&nbsp;

US official was responding to a question from Senator Angus King on the intelligence community's assessment of what China wants.

China is using the strategy of giving credit and loans to countries across the world to become a global power with great influence, a top US intelligence official has said. Daniel R Coats, Director of National Intelligence, told members of the Senate Armed Services Committee during a Congressional hearing said China was using a number of techniques that are far more than just the typical military land grab to increase its influence. "While China is modernising its military, is increasing its spending, most of it appears to be done for a deterrence purpose, rather than an aggressive purpose. They clearly have a strategy of using credit and loans to countries around the world, particularly in geo-strategic places, then combining it with some military capacity — South China Seas — their new base in Djibouti," Coats said. "We see that China is seeking, I think, to become a world power with great influence on a global basis. And they're using a number of techniques that are far more than just the typical military land grab that we see more likely with Russia, rather than China," Coats said. He was responding to a question from Senator Angus King on the intelligence community's assessment of what China wants. "Are they moving toward military aggression and enlargement of their territory? Or are they looking more toward political and economic influence in the region?" he asked. "It appears to be the latter," Coats said.

China giving loans to countries across world to increase its influence: US official

The latest banking scam, this time in the Punjab National Bank to the tune of INR 11,000 crores, is yet another reminder of just how well the Indian economy is being managed in the interests of the super-wealthy. Over the years, and particularly during the boom years of the 2000s, when employment growth was negligible and &ldquo;jobless growth&rdquo; became a commonly used phrase, India&rsquo;s corporate elite, including some of its best-known business houses, went on a borrowing spree. They borrowed from private and public sector banks, they borrowed domestically and abroad. It is now clear that many of these loans were never intended to be repaid. The public sector banks, in particular, issued thousands of crores worth of loans without due diligence or even with active collaboration in the fraud.&nbsp;

Starting in the early years of this decade, the Reserve Bank of India itself was under pressure to do something about the building problem and started forcing public sector banks to reveal how many such loans were on their books. This is when the true extent of the problem, long-festering, started becoming apparent.&nbsp;

As per the recent estimates, there are around INR 10 lakh crores worth of bad loans in the Indian banking system. This number will likely rise. To gain a sense of proportion this is around 7% of India&rsquo;s GDP. The entire union budget for this year was INR 24.42 lakh crores and the fiscal deficit was around 6.2 lakh crores. This year&rsquo;s MGNREGA budget is INR 55,000 crores.

The amount of money borrowed by India&rsquo;s wealthy citizens in connivance with its officials with no intention of ever repaying it is larger than the amount that the union government spends on health, education, food and fuel subsidies, agriculture, rural and urban development, combined.&nbsp;

But this is not the end of the bad news for the country&rsquo;s ordinary citizens who still struggle for small amounts of credit to run their businesses and households. First, it is not known how much of this massive borrowing became a useful investment in the economy and how much was converted into unproductive foreign and domestic assets, as well as luxury consumption.

If the Nirav Modi case is any indication, then we may expect more the latter than the former. Second, not only have we paid once in the form of the opportunity cost of these loans, i.e. the alternative uses to which we could have put this credit, we are paying for it a second time in the form of the budget outlays on what is called bank recapitalisation. This is where the government uses its tax revenue to replace bad assets (loans that will never be repaid) with good ones. This allocation for the current budget was INR 2.11 lakh crores, larger than the allocation for many crucial development programs.

National outrage has understandably followed the latest revelations. But sadly, as expected, this has given the proponents of bank privatisation another excuse to push their agenda. Since the vast majority of bad loans in the banking system are on the books of the public sector banks, the solution seems simple. Privatise them. Make them subject to market discipline and such corruption and negligence will not occur. But this argument appealing to the power of the market to discipline finance can only be convincing to those who have been asleep through the 2008 financial crisis. The cronyism, corruption, conflicts of interest, and open fraud that were the hallmark of this crisis are very well-documented. That very few high profile convictions resulted is a testament to the power of the finance lobby in the United States and elsewhere than to the lack of evidence.&nbsp;

What makes us think that the equally, if not more, compromised Indian institutional climate will respond any better under a largely private banking sector than a public one? Privatisation of banks does not alter the fact that 1% of the richest Indians control nearly 60% of its wealth. Further, a private banking system is not the same as a competitive one. The US has the former, but no one would mistake it for the latter.

The PSU banks have to be reformed is clear. But &ldquo;reform&rdquo; is not a synonym for &ldquo;privatise.&rdquo; What we urgently need is public, accountable, and functional finance.

The country&rsquo;s permanently credit-starved micro, small and medium sector, including agriculture, can truly transform this economy if supported well. Their individual credit requirements are not high, but they are large in numbers. Such a situation is ideal for a distributed public banking system. The current high-handedness and lack of accountability in public banking is not an excuse to privatise it. It is an excuse to make it accountable locally. Something we have never attempted seriously. Banking performs the crucial function of linking savers with borrowers, those with capital to those who can use it. Further, having the power to create money by making loans, banks are endowed with one of the most powerful tools of development. There is no argument for making this incredible power beholden to elite interests. There is every argument for making it as decentralised and distributed as possible.

But what about the bad loans? Here too the choice is clear; whether to pursue those who stole the money and to retrieve it, or to pay for our theft ourselves. The answer should be obvious.

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

There are around INR 10 lakh crores worth of bad loans in the Indian banking system. This number will likely rise.

The latest banking scam, this time in the Punjab National Bank to the tune of INR 11,000 crores, is yet another reminder of just how well the Indian economy is being managed in the interests of the super-wealthy. Over the years, and particularly during the boom years of the 2000s, when employment growth was negligible and “jobless growth” became a commonly used phrase, India’s corporate elite, including some of its best-known business houses, went on a borrowing spree. They borrowed from private and public sector banks, they borrowed domestically and abroad. It is now clear that many of these loans were never intended to be repaid. The public sector banks, in particular, issued thousands of crores worth of loans without due diligence or even with active collaboration in the fraud. Starting in the early years of this decade, the Reserve Bank of India itself was under pressure to do something about the building problem and started forcing public sector banks to reveal how many such loans were on their books. This is when the true extent of the problem, long-festering, started becoming apparent. As per the recent estimates, there are around INR 10 lakh crores worth of bad loans in the Indian banking system. This number will likely rise. To gain a sense of proportion this is around 7% of India’s GDP. The entire union budget for this year was INR 24.42 lakh crores and the fiscal deficit was around 6.2 lakh crores. This year’s MGNREGA budget is INR 55,000 crores. The amount of money borrowed by India’s wealthy citizens in connivance with its officials with no intention of ever repaying it is larger than the amount that the union government spends on health, education, food and fuel subsidies, agriculture, rural and urban development, combined. But this is not the end of the bad news for the country’s ordinary citizens who still struggle for small amounts of credit to run their businesses and households. First, it is not known how much of this massive borrowing became a useful investment in the economy and how much was converted into unproductive foreign and domestic assets, as well as luxury consumption. If the Nirav Modi case is any indication, then we may expect more the latter than the former. Second, not only have we paid once in the form of the opportunity cost of these loans, i.e. the alternative uses to which we could have put this credit, we are paying for it a second time in the form of the budget outlays on what is called bank recapitalisation. This is where the government uses its tax revenue to replace bad assets (loans that will never be repaid) with good ones. This allocation for the current budget was INR 2.11 lakh crores, larger than the allocation for many crucial development programs. National outrage has understandably followed the latest revelations. But sadly, as expected, this has given the proponents of bank privatisation another excuse to push their agenda. Since the vast majority of bad loans in the banking system are on the books of the public sector banks, the solution seems simple. Privatise them. Make them subject to market discipline and such corruption and negligence will not occur. But this argument appealing to the power of the market to discipline finance can only be convincing to those who have been asleep through the 2008 financial crisis. The cronyism, corruption, conflicts of interest, and open fraud that were the hallmark of this crisis are very well-documented. That very few high profile convictions resulted is a testament to the power of the finance lobby in the United States and elsewhere than to the lack of evidence. What makes us think that the equally, if not more, compromised Indian institutional climate will respond any better under a largely private banking sector than a public one? Privatisation of banks does not alter the fact that 1% of the richest Indians control nearly 60% of its wealth. Further, a private banking system is not the same as a competitive one. The US has the former, but no one would mistake it for the latter. The PSU banks have to be reformed is clear. But “reform” is not a synonym for “privatise.” What we urgently need is public, accountable, and functional finance. The country’s permanently credit-starved micro, small and medium sector, including agriculture, can truly transform this economy if supported well. Their individual credit requirements are not high, but they are large in numbers. Such a situation is ideal for a distributed public banking system. The current high-handedness and lack of accountability in public banking is not an excuse to privatise it. It is an excuse to make it accountable locally. Something we have never attempted seriously. Banking performs the crucial function of linking savers with borrowers, those with capital to those who can use it. Further, having the power to create money by making loans, banks are endowed with one of the most powerful tools of development. There is no argument for making this incredible power beholden to elite interests. There is every argument for making it as decentralised and distributed as possible. But what about the bad loans? Here too the choice is clear; whether to pursue those who stole the money and to retrieve it, or to pay for our theft ourselves. The answer should be obvious. (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Opinion: After Nirav Modi frauds PNB, are we to pay for our theft ourselves?

With efforts to recover its dues hitting a virtual dead-end, the State Bank of India (SBI) seems to be have started a clean-up of its balance sheets by writing off loans worth about Rs 7,016 crore owed to it by more than 60 of its top 100 wilful defaulters.

While 63 accounts in the list have been fully written off, 31 have been partially written off and six have been shown as non-performing assets (NPAs), reveal documents accessed by DNA. As on June 30, 2016, SBI has written off Rs 48,000 crore worth of bad loans. The documents, however, don&#39;t specify the entry time of these &quot;write-offs&#39;&#39;.

India&#39;s largest public sector bank has dropped the money, mostly wilfully defaulted, into a specially created dustbin for &quot;toxic loans&quot;&nbsp;called Advance Under Collection Account (AUCA), technically known as a write-off.

Information on the bank&#39;s clean-up comes a week after the government said it was targeting black money hoarders by demonetizing high-value currency notes, a move that has seen millions queue up outside banks across the country to exchange their money.

Now, loans given to Vijay Mallya&#39;s Kingfisher Airlines, which heads the wilful defaulters&#39; list with outstanding dues of almost Rs 1,201 crore, and 62 others will not be shown in the bank&#39;s balance sheet.

Following the defunct airlines in the top 20 write-off list are KS Oil (Rs 596 crore), Surya Pharmaceuticals (Rs 526 crore), GET Power (Rs 400 crore) and SAI Info System (Rs 376 crore). Most of these write-off accounts are those of wilful defaulters.

SBI has put all such accounts into AUCA, says its internal report seen by this correspondent. &quot;The main advantage which the bank will have by transfer to AUCA is that banks gross NPAs amount and net additions in NPAs during the quarter will be reduced to the extent of the amount of transfer to AUCA. It will bring down gross advance by the same amount,&quot; the reports states.

SBI did not send any reply to several emails and reminders sent by this reporter. Questions sent to top five &quot;write-off&quot; companies also didn&#39;t get any reply.

&nbsp;

The top five

Kingfisher Airlines owes a total of Rs 6,963 crore to 17 banks, of which SBI&#39;s loan is Rs 1,201 crore. Recently, an e-auction of Mallya&#39;s Kingfisher Villa in Goa failed to find any buyer. Sources said that SBICAP Trustee did not get earnest money deposit (EMD) from even a single bidder.

KS Oil, once a leading edible oil player under the brand names Kalash and Double Sher in the mustard oil segment, turned defaulter and got added to the top 20 list of write-off accounts. KS Oil has allegedly indulged in the diversion of funds from its core business. The company invested huge amounts on plantations in Indonesia and Malaysia but failed to get the expected returns. Though the loan account has been restructured, the company has been unable to revive itself. Lenders have also withdrawn the company from CDR (corporate debt restructure). KS Oil was declared NPA in 2013 with effect from September 30, 2011. As with Kingfisher, the recovery effort was futile as e-auction of five units failed due to lack of bidders.

The third in the list of write-off accounts, Surya Pharmaceutical, was named a wilful defaulter in 2013. The company allegedly indulged in fraud, diversion of funds in retail and education sectors. SBI has symbolic possession of eight properties and is struggling for another in Jammu and Kashmir. A forensic audit from E&amp;Y tagged this a fraud account.

Ajay Kumar Vishnoi&#39;s promoted GET Power Ltd was declared wilful defaulter on August 23, 2016. The company&#39;s mismanagement and the delay in projects led to trouble for the promoters.

The fifth in the list, Sai Info, has dues of Rs 375 crore and was declared wilful defaulter on August 26, 2016. In June 2013, the company&#39;s main promoter Sunil Kakkad absconded but was brought back to India and arrested.

Kakkad is now out on bail. The company has cancelled two high value projects &ndash; from the Department of Posts and a Mumbai CCTV surveillance project &ndash; worth Rs 2,200 crore. This account has also been declared a fraud. SBI could not get any recovery and could only get symbolic possession of some of the properties.

&nbsp;

What are the write-offs?

Banks exercising write-offs is a unique idea to clear bad loan impacts on balance sheets. Banks use the RBI approved tool, Advance Under Collection Accounts (AUCA), in which transfer of accounts to a specific AUCA is an NPA reduction strategy. It is resorted to after exhausting all avenues of recovery, restructuring and compromises. By writing-off bad and doubtful assets, banks can improve NPA ratios through cleansing of the balance sheet and tax benefits. All write-offs, except where one-time settlement or compromises are involved, irrespective of outstanding, should be treated as technical write-offs and parked in AUCA; recovery process of these accounts will continue till resolution of these accounts.

(This report first appeared in DNA)

&nbsp;

Loans given to Kingfisher baron Vijay Mallya, who heads the wilful defaulters' list?and 62 others will not be shown in SBI's balance sheet

With efforts to recover its dues hitting a virtual dead-end, the State Bank of India (SBI) seems to be have started a clean-up of its balance sheets by writing off loans worth about Rs 7,016 crore owed to it by more than 60 of its top 100 wilful defaulters. While 63 accounts in the list have been fully written off, 31 have been partially written off and six have been shown as non-performing assets (NPAs), reveal documents accessed by DNA. As on June 30, 2016, SBI has written off Rs 48,000 crore worth of bad loans. The documents, however, don't specify the entry time of these "write-offs''. India's largest public sector bank has dropped the money, mostly wilfully defaulted, into a specially created dustbin for "toxic loans" called Advance Under Collection Account (AUCA), technically known as a write-off. Information on the bank's clean-up comes a week after the government said it was targeting black money hoarders by demonetizing high-value currency notes, a move that has seen millions queue up outside banks across the country to exchange their money. Now, loans given to Vijay Mallya's Kingfisher Airlines, which heads the wilful defaulters' list with outstanding dues of almost Rs 1,201 crore, and 62 others will not be shown in the bank's balance sheet. Following the defunct airlines in the top 20 write-off list are KS Oil (Rs 596 crore), Surya Pharmaceuticals (Rs 526 crore), GET Power (Rs 400 crore) and SAI Info System (Rs 376 crore). Most of these write-off accounts are those of wilful defaulters. SBI has put all such accounts into AUCA, says its internal report seen by this correspondent. "The main advantage which the bank will have by transfer to AUCA is that banks gross NPAs amount and net additions in NPAs during the quarter will be reduced to the extent of the amount of transfer to AUCA. It will bring down gross advance by the same amount," the reports states. SBI did not send any reply to several emails and reminders sent by this reporter. Questions sent to top five "write-off" companies also didn't get any reply. The top five Kingfisher Airlines owes a total of Rs 6,963 crore to 17 banks, of which SBI's loan is Rs 1,201 crore. Recently, an e-auction of Mallya's Kingfisher Villa in Goa failed to find any buyer. Sources said that SBICAP Trustee did not get earnest money deposit (EMD) from even a single bidder. KS Oil, once a leading edible oil player under the brand names Kalash and Double Sher in the mustard oil segment, turned defaulter and got added to the top 20 list of write-off accounts. KS Oil has allegedly indulged in the diversion of funds from its core business. The company invested huge amounts on plantations in Indonesia and Malaysia but failed to get the expected returns. Though the loan account has been restructured, the company has been unable to revive itself. Lenders have also withdrawn the company from CDR (corporate debt restructure). KS Oil was declared NPA in 2013 with effect from September 30, 2011. As with Kingfisher, the recovery effort was futile as e-auction of five units failed due to lack of bidders. The third in the list of write-off accounts, Surya Pharmaceutical, was named a wilful defaulter in 2013. The company allegedly indulged in fraud, diversion of funds in retail and education sectors. SBI has symbolic possession of eight properties and is struggling for another in Jammu and Kashmir. A forensic audit from E&Y tagged this a fraud account. Ajay Kumar Vishnoi's promoted GET Power Ltd was declared wilful defaulter on August 23, 2016. The company's mismanagement and the delay in projects led to trouble for the promoters. The fifth in the list, Sai Info, has dues of Rs 375 crore and was declared wilful defaulter on August 26, 2016. In June 2013, the company's main promoter Sunil Kakkad absconded but was brought back to India and arrested. Kakkad is now out on bail. The company has cancelled two high value projects – from the Department of Posts and a Mumbai CCTV surveillance project – worth Rs 2,200 crore. This account has also been declared a fraud. SBI could not get any recovery and could only get symbolic possession of some of the properties. What are the write-offs? Banks exercising write-offs is a unique idea to clear bad loan impacts on balance sheets. Banks use the RBI approved tool, Advance Under Collection Accounts (AUCA), in which transfer of accounts to a specific AUCA is an NPA reduction strategy. It is resorted to after exhausting all avenues of recovery, restructuring and compromises. By writing-off bad and doubtful assets, banks can improve NPA ratios through cleansing of the balance sheet and tax benefits. All write-offs, except where one-time settlement or compromises are involved, irrespective of outstanding, should be treated as technical write-offs and parked in AUCA; recovery process of these accounts will continue till resolution of these accounts. (This report first appeared in DNA)

India's largest public sector bank drops loans worth more than Rs 7,000 crore?from 63 defaulters

As China&#39;s economy notches up another quarter of steady growth, the pace of credit creation grows ever more frantic for every extra unit of production, as inefficient state firms swallow an increasing share of lending. 
 
The world&#39;s second-largest economy grew 6.7 per cent in the first half of the year, unchanged from the first quarter, testament to policymakers&#39; determination to regulate the pace of slowdown after 25 years of breakneck expansion. 
 
Analysts say that determination has come at the cost of a dangerous rise in debt which is six times less effective at generating growth than a few years ago. 
 
&quot;The amount of debt that China has taken in the last 5-7 years is unprecedented,&quot; said Morgan Stanley&#39;s head of emerging markets, Ruchir Sharma, at a book launch in Singapore. &quot;No developing country in history has taken on as much debt as China has taken on on a marginal basis.&quot; 
 
While Beijing can take comfort that loose money and more deficit spending are averting a more painful slowdown, the rapidly diminishing returns from such stimulus policies, coupled with rising defaults and non-performing loans, are creating what Sharma calls &quot;fertile (ground) for some accident to happen&quot;. 
 
From 2003 to 2008, when annual growth averaged more than 11 per cent, it took just one Yuan of extra credit to generate one Yuan of GDP growth, according to Morgan Stanley calculations. 
 
It took two for one from 2009-2010, when Beijing embarked on a massive stimulus programme to ward off the effects of the global financial crisis. 
 
The ratio had doubled again to four for one in 2015, and this year it has taken six Yuan for every Yuan of growth, Morgan Stanley said, twice even the level in the United States during the debt-fuelled housing bubble that triggered the global crisis. 
 
Total bond debt in China is up over 50 per cent in the past 18 months to 57 trillion Yuan ($8.5 trillion), equal to around 80 per cent of GDP, and new total social financing, the widest measure of credit provided by China&#39;s central bank, rose 10.9 per cent in the first half of 2016 to 9.75 trillion Yuan. 
 
Short termism 
 
China&#39;s money supply has increased in tandem with new lending, and at 149 trillion Yuan is now 73 per cent higher than in the United States, an economy about 60 per cent larger. 
 
&quot;China is the largest money printer in the world - they have been for some time. The balance is really extreme,&quot; says Kevin Smith, CEO of US-based Crescat Capital. 
 
The reason China gets such poor returns from this pump-priming is that state firms are the main beneficiaries of extra credit, at the expense of the more efficient private sector. 
 
Some of the slowdown in private sector growth is weak confidence in the business outlook, but a lack of access to affordable financing is also a factor, the government and economists say, as banks prefer the security of state-owned borrowers. 
 
Private firms had to pay 6 percentage points more in interest for bank loans in the second quarter versus the public sector, analysts at investment bank CICC estimate. 
 
Though Beijing officially wants to rebalance the economy to the private sector and cut surplus capacity in inefficient heavy industry, that aspiration clashes with its more immediate ambition to hit its growth targets. 
 
For now it seems the latter goal is over-riding the former. 
 
Policymakers say that while corporate debt is high, the central government has room to increase its debt ratios and raise its fiscal deficit to between 4 and 5 per cent to boost the economy. 
 
And analysts expect more monetary easing in the form of interest rate cuts, which will encourage more borrowing and more bad debts. 
 
&quot;We believe that China&#39;s short-termism will only add to its long-standing problems of excess capacity and non-performing loans,&quot; Fathom Consulting analyst Laura Eaton wrote in a note following the release of first-half GDP data. 
 
Smith at Crescat Capital thinks it will lead to a twin currency and banking crisis, with a 20 per cent crash in the Yuan versus the dollar. 
 
&ldquo;It&rsquo;s a question of when, and it looks like it&rsquo;s coming pretty close,&quot; he said. 
 
(Reuters) 
 
&nbsp;

Decline in returns accompanied by increase in defaults and non-performing loans is creating a platform for a major mishap in Chinese economy

As China's economy notches up another quarter of steady growth, the pace of credit creation grows ever more frantic for every extra unit of production, as inefficient state firms swallow an increasing share of lending. The world's second-largest economy grew 6.7 per cent in the first half of the year, unchanged from the first quarter, testament to policymakers' determination to regulate the pace of slowdown after 25 years of breakneck expansion. Analysts say that determination has come at the cost of a dangerous rise in debt which is six times less effective at generating growth than a few years ago. "The amount of debt that China has taken in the last 5-7 years is unprecedented," said Morgan Stanley's head of emerging markets, Ruchir Sharma, at a book launch in Singapore. "No developing country in history has taken on as much debt as China has taken on on a marginal basis." While Beijing can take comfort that loose money and more deficit spending are averting a more painful slowdown, the rapidly diminishing returns from such stimulus policies, coupled with rising defaults and non-performing loans, are creating what Sharma calls "fertile (ground) for some accident to happen". From 2003 to 2008, when annual growth averaged more than 11 per cent, it took just one Yuan of extra credit to generate one Yuan of GDP growth, according to Morgan Stanley calculations. It took two for one from 2009-2010, when Beijing embarked on a massive stimulus programme to ward off the effects of the global financial crisis. The ratio had doubled again to four for one in 2015, and this year it has taken six Yuan for every Yuan of growth, Morgan Stanley said, twice even the level in the United States during the debt-fuelled housing bubble that triggered the global crisis. Total bond debt in China is up over 50 per cent in the past 18 months to 57 trillion Yuan ($8.5 trillion), equal to around 80 per cent of GDP, and new total social financing, the widest measure of credit provided by China's central bank, rose 10.9 per cent in the first half of 2016 to 9.75 trillion Yuan. Short termism China's money supply has increased in tandem with new lending, and at 149 trillion Yuan is now 73 per cent higher than in the United States, an economy about 60 per cent larger. "China is the largest money printer in the world - they have been for some time. The balance is really extreme," says Kevin Smith, CEO of US-based Crescat Capital. The reason China gets such poor returns from this pump-priming is that state firms are the main beneficiaries of extra credit, at the expense of the more efficient private sector. Some of the slowdown in private sector growth is weak confidence in the business outlook, but a lack of access to affordable financing is also a factor, the government and economists say, as banks prefer the security of state-owned borrowers. Private firms had to pay 6 percentage points more in interest for bank loans in the second quarter versus the public sector, analysts at investment bank CICC estimate. Though Beijing officially wants to rebalance the economy to the private sector and cut surplus capacity in inefficient heavy industry, that aspiration clashes with its more immediate ambition to hit its growth targets. For now it seems the latter goal is over-riding the former. Policymakers say that while corporate debt is high, the central government has room to increase its debt ratios and raise its fiscal deficit to between 4 and 5 per cent to boost the economy. And analysts expect more monetary easing in the form of interest rate cuts, which will encourage more borrowing and more bad debts. "We believe that China's short-termism will only add to its long-standing problems of excess capacity and non-performing loans," Fathom Consulting analyst Laura Eaton wrote in a note following the release of first-half GDP data. Smith at Crescat Capital thinks it will lead to a twin currency and banking crisis, with a 20 per cent crash in the Yuan versus the dollar. “It’s a question of when, and it looks like it’s coming pretty close," he said. (Reuters)

China averts slowdown, risks dangerous rise in debt numbers

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