The hollow pillars of our economy.

Banks are the pillars of any economy. They provide a safe place to store our money on which they pay interest. They lend this money back to us to buy houses, cars and for other expenses, such as an illnesses. Industries take loans from banks to build factories to provide us with consumer goods, thus creating new employment, and builders build houses for us to live in, employing large numbers of laborers. The importance of banks to the economy was dramatically illustrated by the global crisis precipitated by the fall of Lehman Brothers, which was not even as large as HSBC or Morgan Stanley. The report of a net loss of Rs 12.38 billion by the United Bank of India, in the quarter ending on 31 December, has suddenly shone the spotlight on the precarious condition of the public sector banks in India. The Reserve Banks has banned UBI from lending any more until the mess is sorted out. Gross Non Performing Assets or NPAs, as bad loans are known, rose by 36% to Rs 2.43 trillion from Rs 1.79 trillion one year ago. Even private banks are beginning to show an increase in NPAs. Public sector banks are under the control of politicians who force them to lend money to cronies and for buying votes. Thus agriculture and small and medium enterprises account for Rs 20.58 billion of the bad loans at UBI, which makes them suspicious. UBI blames a software provided by Infosys, one of our successful software companies, for not being able to identify which loans were turning sour which is not good news for our IT sector. If the large numbers of small borrowers are the problem at UBI numbers are even more terrifying with large companies. 3700 companies have a total debt of Rs 24 trillion which is a quarter of our GDP and of this Rs 8 trillion are with companies whose interest payments are higher than their profits. This would not have happened had the RBI not surrendered to the bullying by the Congress and kept interest rates low while inflation was shooting up. A combination of high inflation and extortionate taxes has brought growth down to below 5% which is reducing profits of companies. Hotels bookings are down as foreign investors look elsewhere. Will anyone be held culpable for the loot. Not if we go by the example of Ramalinga Raju of Satyam who is enjoying lavish parties. This is how the parasites are hollowing out our economy. What is the cure?