Bad loan recoveries, bank recap to boost India's GDP growth: Goldman Sachs

Analysts estimate the decline in costs will raise loan growth by 140 basis points

A decline in credit costs of Indian banks is likely to boost the capacity of lenders to extend loans and, in turn, boost growth in the world’s fastest-growing major economy.

Analysts at Goldman Sachs Group Inc. said India’s measures to improve the recovery of bad loans and a recapitalisation plan equivalent to 1.1 per cent of gross domestic product will lower costs for lenders.

“We estimate that credit costs -- how much banks set aside each year to deal with bad loans -- could fall from a peak of 230 basis points of banking system assets, or around Rs 3.3 trillion ($48