The PNB story should not mask the big picture4 min read . Updated: 09 Mar 2018, 10:31 AM IST
The PNB fraud is an exception. To understand the woes of Indian banking, look to the failure to properly assess economic risks
A scam in the Punjab National Bank (PNB) has been in the news. Policymakers have responded emphatically. The Fugitive Economic Offenders Bill is under active consideration. The National Financial Reporting Authority is being set up. The focus in all this is on checking fraud. It is interesting, however, that the PNB fraud involves a maximum possible loss of Rs11,394 crore for the PNB; this is not even 1% of the total bad loans, which are humongous in India. Ruchir Sharma reported that “... by 2014 ... in all, roughly 15% of state bank loans had gone bad" in India. Bad loans have been huge but surprising as it may sound, relatively speaking, not very many frauds have happened in the larger picture on banks in India. Yet the non-performing assets (NPAs) are humongous. Why?