Welcoming the slew of measures taken by the government in the recent past to clean up bad loans, the International Monetary Fund on Wednesday said that though the steps are in the positive direction more needs to be done as the Indian banking sector as well as Indian corporate sector remain vulnerable.

“A combination of weak banks and weak corporates, which are highly leveraged leaves India vulnerable,” said Ali Al-Eyd, Deputy Division Chief, Global Market Analysis Division at the IMF, adding that more measures are required for adequate capitalisation and further reducing bad debts is required.

“We welcome measures taken so far for capital quality review of public sector banks,” he said at the launch of the Global Financial Stability Report, October 2017.

The IMF is also working in detail on a Financial Sector Assessment Programme for India, which will be released later and will delve into the issue of bad loans.

(The journalist is in Washington DC as part of the IMF Journalism Fellowship 2017 to cover the Annual Meetings of the IMF and World Bank.)