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    ISAS Insights

    Detailed perspectives on developments in South Asia​​

    413 : India’s Bad Debt Problem

    Duvvuri Subbarao

    24 May 2017

    Notwithstanding a host of accomplishments, the biggest promise by India's Prime Minister Narendra Modi during his electoral campaign for the high office - reviving investment and creating jobs ' remains unfulfilled. Obstructing this is the bad debt problem of the Indian banks which have defied resolution to reach crisis proportions. Earlier in May 2017, the government amended the law to invest the Reserve Bank of India with extraordinary powers to direct the process of resolving this crisis. This step has raised a number of concerns even as the prospects of its success are uncertain. A resolution of the problem of bad debts will lead to the next big challenge - of recapitalising the public sector banks. The government will then face limited options. Whether it will finally settle for privatising the public sector banks remains a tantalising question.