The Insider View by Pankaj Gaurav

Burning Problem Indian banking industry is undergoing a big problem of NPA [1] (Non-Performing Asset) crisis in recent years which is eroding the profitability metrics of commercial sector banks, affecting their balance sheets (higher provisions [2] ) and in a longer run impacting overall Indian economy as well. As per recent news, SBI reported a massive 67% fall in consolidated net profit at Rs 1,259.49 crore in the quarter to December 2015, after it classified loans worth Rs 20,692 crore as having turned bad [3] . Other large Public sector banks, to quote a few like Punjab National Bank and Union Bank of India have posted substantial dip in their net profits. RBI has relaxed the norms as part of proposal on April 6 th 2015, which says banks can take 2 more years for classifying certain asset as NPA. This may help banks on going easy on provisioning against bad loans. But this is going to aggravate the problem further in longer run as it may lead to technical bankruptcy ...

High yield Bonds: An Investment opportunity post 2008 economic crisis Post 2008 economic crisis, High yield bond market has evolved significantly in terms of returns generated to investors, as they have been quite rewarding, if they went long and held it to 7 years. There are few exceptions in last quarters on 2015 and Current 2016 Q1,  but period prior to it was remarkably rewarding time for investors in this asset class. From March 31, 2009 to June 30, 2014, the high yield market returned nearly 18% on an annualized basis, with spread to worst dropping from 1,675 basis points to 372 basis points over comparable Treasury bonds (Please refer figure 1)                                Figure 1 [1] [1] Source : S&P Capital IQ LCD, SPUSCHY stands for S&P U.S. Issued High Yield Corporate Bond Index Return of High Yield bonds encompasses two components: Coupon Income an...