Reserve Bank of India (RBI) Governor Raghuram Rajan has called for closer monitoring of the threat to banks from weakening corporate performance and debt-servicing capabilities of leveraged business groups. “Corporate sector vulnerabilities and the impact of their weak balance sheets on the financial system need closer monitoring,” Rajan said, in his foreword to the Financial Stability Report (FSR) released on Wednesday by RBI on behalf of the Financial Stability Development Council (FSDC). India Inc’s overall ability to repay debt, as measured by earnings relative to interest owed, improved in the months to September, but the report warned bad debt was becoming more concentrated among large, highly-leveraged borrowers. The proportion of bad loans held by large borrowers rose to 87.4 per cent in September 2015, from 78.2 per cent in March.

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