Nearly a third of all the bad assets in the Indian banking sector emanate from infrastructure lending. And the effective leverage of infrastructure companies could be four times worse than what is reported because of the use of special purpose vehicles.

These two facts can be found in the Financial Stability Report released by the Reserve Bank on Monday. Put the two together. They show that banks are now weighed down by the infrastructure loans they were pushed into making by the previous government. Banks neither have the long-term deposits nor the risk assessment capabilities to do the job.

There is also a cautionary tale for the current government. China has the financial firepower to force banks to lend to big proj-ects but then step in with budgetary support if these loans turn sour. The Chinese have played the game for long. India does not have that sort of financial muscle to rebuild bank capital every decade.

The upshot: the puzzle of infrastructure finance remains unsolved in India.