The Big Story: Dole for the rich

They’re like a silent-time bomb. In 2016, the bad loans – or gross non-performing assets – of state-owned banks surged by an incredible 56% to Rs 614,872 crore.

Indian Overseas Banks, the worst hit, has a gross NPA ratio (the ratio of bad loans to total loans) of 22%. The figure for UCO bank is 17%.

Who has taken these bad loans? The corporate houses with the largest bad loans are Reliance, Vedanta, Essar, Adani and Jaypee. These NPAs represent a massive transfer of wealth from the Indian taxpayer to India’s business empires. Many large corporate houses are being supported by India’s poorest citizens who, in good faith, pay taxes on everything from biscuits to their hard-earned income.

The effect on India’s economy is disastrous. Many of India’s largest capitalists, surviving on family wealth and government doles, are not entrepreneurs anymore. They have stopped adding value to the system and now exist simply as rent seekers.

Given the strong ties between large capitalists and political parties, there is little action against loan defaulters. In March, for example, Vijay Mallya, who was a member of Parliament at the time, was allowed to fly out of the country by the Modi government in spite of the fact that he owed public sector banks Rs 9,000 crores. Mallya is simply the tip of the iceberg. The largest defaulters sit comfortably without any fear of action from the authorities.

Apart from promoting rent seeking, the extremely stressed nature of India’s banks mean that they will be very cautious about granting new loans in the near future. Given the depressed nature of the economy due to demonetisation, this is bad news.

The Big Scroll

Four charts show how the bad loan problem of Indian banks is much bigger than Vijay Mallya. “Why have bad loans been made?”: Full text of Raghuram Rajan’s speech to Assocham in June 2016. Cronyism case study: How Mukesh Ambani’s loss-making private firm simply got public banks to restructure its loans

Subscribe to “The Daily Fix” by either downloading Scroll’s Android app or opting for it to be delivered to your mailbox.

Political Picks

The Samajwadi Party replied to Modi’s accusations of bias against Hindus in Uttar Pradesh by releasing data for cremation grounds schemes and arrangements for power on Diwali. A new inquiry that recently declared Hyderabad scholar Rohith Vemula an OBC and not a Dalit, as certified by a previous probe, went by the testimonials of only two people, rejecting the views of five others interviewed. The Modi government backed Pakistan’s move to put Hafiz Saeed on the country’s terror list. The Dravida Munnetra Kazhagam took the Tamil Nadu trust vote issue to the Madras High Court. The Union government forced a senior police officer to delete a social media post where he had spoken up against the Delhi Police’s framing and torture of two Kashmiri men in the 2005 Delhi blasts.

Fact check:Eid on 6 July:supply 13,500 MW; Diwali 28 Oct to Nov 1,supply 24 hours all 5 days,15,400 MW per day. Official data: #uppolls2017 — Rajdeep Sardesai (@sardesairajdeep) February 20, 2017

Punditry

Like Russia and China, India should resist the temptation of ideological correctness and be realistic in engaging the American president, argues C Raja Mohan in the Indian Express. There needs to be greater attention to the issue of identity and security that drove the jallikattu protests, says Pradeep Chakravarthy in the Hindu.

Giggle

Don’t Miss

Residents of Mumbai’s poorest slums know polls won’t change a thing for them, but they vote in hope anyway, reports Smruti Koppikar.