Liberalisation and Banking crisis

How Liberalisation is responsible for current Banking Crisis in India?

  • It increased competition among banks which made them give our loans without adequate scrutiny
  • It led to increase in consumption based loans which later turned into NPAs
  • It led to reduced accountability of banks and more corruption
  • Enhanced autonomy without proper regulatory structure led to increase in collusive corruption among banks and corporates
Why Banking crisis is not due to Liberalisation?
  • Crisis is due to lack of exit mechanism to recover loans due to flawed SARFAESI and BIFR approach
  • Economic burden due to social obligation of banks i.e. agricultural loans give low return and are risky
  • Political dole like Agriculture Loans were exempt before election years in past
  • Unethical and corrupt practices were because of legal loopholes, poor regulatory oversight and complex laws.
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