India’s banking sector is frequently under the spotlight, and usually for unflattering reasons—from an insupportable pileup of loans gone bad (non-performing assets or NPAs in banking parlance) to outright fraud to cronyism or worse. The rot is endemic, has hit banks small and big—including some well-regarded names—and is by no means limited to the public sector. If government-owned banks like Punjab National Bank (PNB) and State Bank of India (SBI) have embarrassed themselves, names like YES Bank and ICICI Bank in the private sector have also made headlines for the wrong reasons. The list of banks of dubious honour is long, including, most recently, Lakshmi Vilas Bank (LV Bank), which the RBI (Reserve Bank of India) had to step in to bail out.
The Covid-19 pandemic has aggravated the crisis by another order of magnitude, with the government-mandated moratorium on interest payments (it expired in September) and state-guaranteed loans threatening to further increase the already humongous NPA pile (at Rs 9.4 lakh crore as of June 2019, nearly four times India’s health budget). This has created an unprecedented crisis of capital in the banking system.
This story is from the December 28, 2020 edition of India Today.
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This story is from the December 28, 2020 edition of India Today.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
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