Baffled by the general inability to answer the question “What ails the country's public-sector banks?” that had been haunting the government, the banks’ depositors and the public, the researchers undertook this research. They sought to unravel the factors that had driven the banks to this plight. They interviewed bank officers and consultants and recorded their views to supplement their research. They inferred that the banks were suborned to achieve the much vaunted “social uplift” but ended up assisting the affluent rural farmers, politicians and their crony business persons. Periodically, the government recapitalised these banks, using the taxpayers’ money, no thanks to the banks mostly catering to the financial needs of the wrong category of borrowers, namely, the category of wilful defaulters. The researchers concluded, upon analysing the views of the respondents and their own findings, that strict implementation of the bankruptcy law and seizure of the unencumbered assets of the borrowers would arrest the erosion of the capital base of the banks. Since a big chunk of the banks’ funds had gone into infrastructure projects, the government should make all-out efforts to get these projects going. It made financial sense for the banks to settle for a haircut.
Infrastructure, recapitalize, social uplift, suborned, wilful defaulters
