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Explained: the crisis of bad loans in Indian banks

Jul 11, 2020 17:17 IST

On 31 March, 2019, there were Rs 936,000 crores bad loans in the books of banking sector in India. What is the meaning of NPA's? What were the warning signals in place in the system? Were they paid attention to? Did this situation arise due to bad intentions of promoters or founders or did it happen due to external situations? BOOM explains. Vivek Kaul, Economic Commentator & Author, in his new book Bad Money - Inside The NPA Mess And How It Threatens The Banking System, says that crony capitalism is not the only reason behind this situation. Around 2011, there was a lot of euphoria in Indian markets because India had been growing at a rate of 8-9% year on year. Bankers and corporates got carried away and everyone lended and borrowed more than they should have. The assumption was that the growth rate will be consistent and the loan will be repaid in time. Many projects got stuck in bureaucracy and all calculations went haywire after that. Watch BOOM's Govindraj Ethiraj interview Vivek Kaul on how Nirav Modi and Vijay Mallya are not poster boys of bad loans, but public scapegoats. Corporates are bigger defaulters but media coverage is not the same for them.