Public sector banks need protection.

There was a time not so long ago when you would expect to spend half a day to withdraw a few thousand rupees from an Indian bank. At that time a couple of thousand rupees were enough to meet the expenses of a family of 4 for one month. Then came reforms and inflation and banks improved their services so that you could be in and out in a few minutes, which is good because now you need a thousand rupees a day to survive. Large numbers of private sector and foreign banks have opened branches in all cities, offering a range of services in beautiful air conditioned comfort, very attractive to younger people. Older people still prefer public sector banks because they are considered safe, have much lower charges and and have the comfort of a passbook which can be updated at one's own convenience. To reduce costs private sector and foreign banks prefer to send monthly statements through couriers, which go back if no one is at home to receive them, and then charge large amounts for a replacement copy. In 2008 public sector banks received a large inflow of funds from both people and businesses because the government will never allow a public sector bank to fail. Of course, government control means that two penny politicians can and do force public sector banks to lend to high risk businesses owned by family and friends or to produce a spurt in spending to produce a false growth in the economy to win elections. That is what happened in 2008-2009 when the Congress forgave all loans to farmers at a cost of Rs 750 billion, kept interest rate very low to encourage borrowing and borrowed vast amounts to increase salaries of useless civil servants by 80%. They won the elections but have left public sector banks with huge Non Performing Assets as companies find it difficult to service their loans in a slowing economy and falling demand due to high inflation. Last year Rs 750 billion worth of loans were officially restructured under the Corporate Debt Restructuring scheme. In an effort to control bad loans banks have now been instructed to get tough with borrowers. Business owners will be asked to furnish personal guarantees as collateral if they ask for their debt to be restructured. Banks will also be watched to prevent them rolling over bad loans on the sly. The economy is so unforgiving.