Ghanshyam Kulwal, 46, an exporter of towels and sheets in Mumbai, is feeling the squeeze. He bought a two-bedroom apartment in the suburb of Kandivali in 2003 for his wife and two children, taking a loan from what was then ABN Amro Bank NV at a floating rate of 6 percent. Today he's paying 12.5 percent.
"The government's one-point agenda to check inflation by raising rates has led to common people like me suffering a lot," Kulwal said.
Bailout Loan
The cost of insuring State Bank of India's bonds against non-payment with five-year credit-default swaps increased as much as 48 basis points this year to 208 on July 18, the highest since July 2010, according to CMA. Swaps for ICICI Bank Ltd., the second-biggest Indian lender, jumped by as much as 54 basis points to a 12-month high of 253 on July 19.
"Whenever you have a period of high growth and the macroeconomic picture changes, there will always be an issue" with credit quality, said Sampath Kumar, an analyst at brokerage India Infoline Ltd. in Mumbai.
Lenders in other emerging economies are also showing signs of stress. Bank of Moscow needed the biggest bailout in Russian history last month after racking up at least 150 billion rubles ($5.4 billion) of unsecured bad loans. The $14 billion rescue of the country's fifth-largest bank signaled Russian lenders' health may be "substantially worse" than most investors judge, Carroll Colley, a director at New York-based research firm Eurasia Group, wrote in a July 8 report.
Russian lenders accounting for 51 percent of the banking system's assets failed central bank stress tests this year. Losses in the stress scenario may amount to 5.2 percent of gross domestic product, Bank Rossii said in an April report.
Turkey Boom
In Turkey, annual credit growth of more than 30 percent has fueled a boom in domestic demand that widened the country's 12- month current-account deficit to a record $68.2 billion in May. The combination of loose credit and a growing trade gap makes Turkey's financial system vulnerable to a drop in risk appetite, according to Shaoul, whose $741 million Marketfield Fund has climbed 7.3 percent during the past year, beating 66 percent of peers, according to data compiled by Bloomberg.
Souring loans in emerging markets could affect global banks. Banco Santander SA shares sank 3.2 percent on July 27 after Spain's biggest lender reported a 32 percent surge in loan-loss provisions in Brazil, an increase that surprised investors, according to Daragh Quinn, an analyst at Nomura International in Madrid.
Profit Reports