The writing was on the wall; just that no one wanted to acknowledge it. The bad loan crisis that has gripped India’s Rs 95 trillion banking sector didn’t happen overnight.
For years, Indian lenders, especially state-run banks, were engaged in volume game to balloon their balance sheets and appease their promoter (the government). That has been so ever since nationalisation of these banks happened in two stages (beginning 1969). Governments often treated these banks as their extended arms and used them for populist measures.
There used to be competition among sarkari banks to flag their total business number on front-pages of national newspapers but very little attention was paid to the quality of assets. Every outgoing chairman passed the buck to his successor.
“That was a time (2011-2013) when everyone rushed to give money to corporations, no matter what the credit perception was. Everyone expected a miraculous pick-up in the economy,” recalled a former banker with a nationalised bank who now works as a consultant.
Firstpost takes a look at how the NPA picture of India’s government-owned banks have evolved so far:
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