"The Indian banking system is mainly in public hands and was used to finance crony capitalism, which has held the country back for too many years. "As Governor, Rajan has rightly decided to force the banks to cut down exposure to their most dubious borrowers, even at the cost of bringing out non-performing loans. "But in times of crisis, these losses are likely to bring down the banking system (see the Italian case) and then the whole economy is paralyzed. With the country growing at 8 per cent, these losses can be easily absorbed by the banking system. So far, Indian banks have lived in the illusion that all debtors would pay sooner or later, even when borrowers often borrowed from one bank to pay another.

Source: Economic Times June 12, 2016 10:50 UTC