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Indian Bankers Scramble As Banks Threaten to Force Repayment of Loans

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The Supreme Court of India is starting to realize that its bankers are those friends that never complete your Venmo request.

Two recent rulings by the Supreme Court threaten to usher in the repayment of nearly 500 billion rupees in loans ($6.73 billion USD). The money is owed to India’s largest banks.

The first ruling blocked Future Group’s sale of retail assets to Reliance Industries for $3.4 billion USD. The conglomerate group was depending on this sale to repay nearly $3 billion USD that it owes to Indian government banks.

Similarly, the Supreme Court disallowed telecom companies to renegotiate contracts and overdue payments with the Department of Telecommunications. Now, investors fear if Vodafone Idea, one of India’s largest telecom operators, will repay the $4 billion USD that it owes to Indian banks.

The rulings could cause Future Group and Vodafone Idea to file for bankruptcy, likely by December of this year. This holds interesting implications as Future Group’s largest lender is the State Bank of India. One questions if the Supreme Court’s rulings are only hurting the government in the long run. 

These events follow a report from December 2020, detailing that India is grappling with $140 billion USD in bad loans (Bloomberg News). India’s loan issue was inflated by the pandemic, during which it pumped loans into small businesses in an attempt to boost credit in the country. Loans that had been sitting in the government’s pipeline for years were suddenly being approved.

India’s loan issue was also caused by unfortunate bad timing when the country chose to hold 400 loan fairs across the country, right before the pandemic hit. It was the first time that they had done so in over thirty years.

In October 2019 alone, India’s Finance Ministry disbursed $35 billion USD in loans. This was a record for monthly lending in India (Reuters). 

At the time, analysts fretted that due diligence standards were being tossed to the side in favor of lending increases. 

Now, nearly two years later, the analysts’ fears appear to be realized, and the Supreme Court of India has yet to come up with a plan of action, leaving the future of many Indian mega corporations uncertain.

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Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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