The Night Is Not Yet Over...

...but the role of banks being the sole lenders in town is in its sunset days.

- Raghu Mohan

IN WHAT WAY WAS FISCAL 2017 different from the preceding one for banks? The response hinges on whom you seek out. Voices from the top draw of banks will say that despite demonetisation and the state of our credit markets, banks held the flight path in their businesses; made strides in digital banking and payments. In banks lower down the league — be it state-run or otherwise — it will be one big wail about dud-loans, the lack of capital with the usual homilies thrown in about how the tide will rise sometime down the line to lift all boats. What you can’t get away from is at the systemic level, we were very much in the same place — this is not to say the Insolvency and Bankruptcy Code (IBC 2016) or the crack of the whip by Mint Road to clean up banks were of little importance; just that many seasons will pass before these pay off at the ground level.

At Ground Zero…

The consolidated balance sheets of banks continued to shrink; it had begun from the end of calendar year 2014. The Reserve Bank of India’s (RBI) report ‘Trend and Progress of Banking in India (2016-17)’ points out, it fell to 7.2 per cent at end-March 2017, down from 7.7 per cent. Blame it on the decline in asset quality and a sharp rise for its provisioning.