Allahabad Bank has recently reported a 259 million dollar fraud by Bhushan Power and Steel. Bhushan Power and Steel is a now bankrupt steelmaking company that has been around since 1970. This was after the Punjab National Bank also announced a fraud of 554.6 million dollars by the same company.
India already has 200 billion dollars of zombie debt piled up. When banks cannot recover debts from companies that refuse or cannot pay them, they ‘sell’ these loans at a massive discount to a debt scavenger, or someone who is looking for debt, who charges it to their customers. These debts are called zombie debts.
India has the world’s worst bad loan ratio. In 2016, PM Narendra Modi announced new resolutions to the resolve bad loaning crisis. However, the process of legal action has tied the whole thing up. To save the banking sector, the Indian government has also invested 25 million dollars into it and conducted an inspection by the central bank, RBI (Reserve Bank of India). However, weak banks have now resumed loaning. Out of 11 banks that had strict regulations imposed on them by the RBI, 5 have been taken off the list despite not being completely ready.
What do you think? Will India recover from such a bad stroke? Comment down below…