Effect of Federal Rate, RBI Actions and Chinese Impact on NPA in India

Recent developments across the world are showing signs of further stress in the economy. China has already devalued its’ currency by almost 5% which has burnt the cream of share market in India by almost 10%. This has also made the USD against INR costlier by almost 5%. Rupee has already crossed Rs. 66.00 barrier recently. Meanwhile there was a tension in Indian economy of US federal rate hike. Had it been, it would have further affected the FDI in the country.

Since long things are not very favourable for the country. This could have been handled by positive support to the domestic industry and better interest rates but it seems the analysis at the highest level is not in sync with the ground realities.  We are deeply affected by the happenings in China and US as a part of global economy but the strategies are not in place to face these situations which are quite frequent now.  China may further devalue the currency by 5%-10% which would throw great challenge to Indian economy. Further the interest rates in our country are too high to sustain. Indian industry without proper support will not be in the position to combat the global challenges and this will further deteriorate the NPA situation of our country. In current year 2014-15, we could not come across to any exciting steps by the government which can help the NPA accounts to improve. Major capital intensive sectors like Infrastructure (Road, power, port, bridges etc.), Steel, Cement, real estate,  automobiles, mining are passing through a serious surviving challenges and something concrete is not done, there will be sea of stressed accounts in the banking sector.

Last three years have seen huge jump in NPA accounts bleeding almost all the banks. This trend is not yet stopped rather the events unfolding in Indian corporate sector and global challenges will further strengthen this jump of NPA accounts.