Will the rupee be sacrificed to save banks?

The Reserve Bank has published its concerns over the amount and quality of bank lending. In a report it says," In the past, growth in sensitive sectors - viz real estate, capital markets and commodities - generally followed a pattern similar to the growth in overall credit. However, in 2012-13, growth in credit to sensitive sectors almost doubled primarily on account of credit to real estate. This expansion needs to be seen in light of rise in housing prices in all Tier I and Several Tier II cities in 2012-13." Real estate, the share market and commodities are called sensitive because prices in these sectors are very volatile and the RBI is especially concerned about the enormous bubble in property prices. 15.9% of bank credit is in properties. The quality of loans is also deteriorating as shown by a 37% rise in Corporate Debt Restructuring. Public sector banks will need an additional capital of Rs 4.15 trillion of which Rs 1.5 trillion will be in equity capital and the rest will be in debt capital. The government has already infused Rs 477 billion and promised an additional Rs 140 billion. When the government is borrowing trillions from banks where will it find the money to fund the banks? Borrow with one hand while lending with the other, joke or mystery? Even greater worry is because banks are using short term deposits to lend long term. Since all government figures are suspect we probably do not know the real extent of the stink. The Congress forgave all bank loans to farmers in 2008 to win elections in 2009. Farmers have spent Rs 2 trillion on the Kisan Credit Card which they have no intention of repaying. In an article in the Hindustan Times, Samar Halarnkar writes about how, in 2002, a bunch of journalists had looked into how billionaires refused to repay billions of rupees to banks. He cites the example of Pramod Mittal, younger brother of steel billionaire, Lakshmi Mittal, who refused to repay Rs 60 billion he owed to banks. In 2011 Pramod Mittal arranged a lavish wedding for his daughter in a palace in Istanbul in Turkey. In 2002 unpaid loans amounted to Rs 1.1 trillion which is Rs 3 trillion in today's money, enough to build an expressway in every state and a school in every village. While banks send thugs to snatch a car if we miss a couple of EMIs they are happily writing of billions from the robber barons. No doubt politicians and civil servants get their shares. Banks cannot collapse because the government will print money to capitalise them. But the rupee will.