After the deluge
Indian Banks' Credit Fantasy
A deluge of cash and a tax break on interest payments aren't enough.
This article is for subscribers only.
Three months ago, Gadfly advised India's state-run banks to stop lending because they didn't have the capital to keep up appearances. That was before the surprise Nov. 8 cash ban, which led to a deluge of low-cost deposits into the system. Add a government eager to dispel criticism that getting rid of 86 percent of the currency in circulation is bleeding the economy, and there's hope of credit soaring anew on the wings of fiscal sops.
Expect the flight of fantasy to be short-lived.