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LATEST NEWS UPDATES | Bank mergers don't address crux of crisis: The nexus between lenders, borrowers and election funding -Christophe Jaffrelot

Bank mergers don't address crux of crisis: The nexus between lenders, borrowers and election funding -Christophe Jaffrelot

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published Published on Sep 25, 2019   modified Modified on Sep 25, 2019
-The Indian Express

To understand what is at stake in the NPA story, one needs first to understand why the public sector banks lent so much money to companies which are today unable to pay it back.

India’s economic crisis that is finding expression in low-growth rates and high unemployment rates is partly due to the decline of investments, which is partly due to the fact that companies cannot get access to loans as easily as before. This is a direct consequence of the huge level of the banks’ Non Performing Assets (NPAs), which have jumped from Rs 1.2 trillion in 2012 to 9.5 trillion in 2018. Public banks represented 70 per cent of these NPAs.

Last month, after a year of reflection, the Centre announced reforms in the banking system, which are mostly about the merger of weak banks. But “reform” could actually be the wrong word if nothing else is done, because last month’s decision does not address the crux of the matter.

To understand what is at stake in the NPA story, one needs first to understand why the public sector banks lent so much money to companies which are today unable to pay it back. In the 2000s, when the UPA held office, everybody thought that double digit growth rates were there to stay. But this euphoria was not the only factor and the dubious practice did not stop in 2014.

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The Indian Express, 25 September, 2019, https://indianexpress.com/article/opinion/columns/banking-on-politics-india-economic-slowdown-unemployment-6025609/


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