Our banks need help from the Rain God.

Reserve Bank Governor, Raghuram Rajan has taken a broom to Indian banks in an attempt to clean out bad loans. Gross Non Performing Assets, a jargon for bad loans, amounted to an eye-popping Rs 5.7 trillion in 38 out of 39 listed banks at the end of March, which is the end of the financial year. The RBI provided a list of companies, which have been financially stressed for several quarters, and asked banks to treat loans to these as NPAs. In the quarter ending in March public sector banks posted a net loss of Rs 234.93 billion, compared to a profit of Rs 88.07 billion in the same period last year. State Bank of India's gross bad loans is close to Rs 1 trillion, Punjab National Bank has bad loans of Rs 558.18 billion, while Bank of India has bad loans of Rs 478.79 billion. Frightened of adding to bad assets banks try to cut down on disbursing loans, resulting in a fall in interest earnings, making it difficult to provide for the bad loans. State Bank chief, Arundhati Bhattacharya has said that the bank is keeping a " special watch " on loans worth Rs 313.52 billion. If the economy improves the loss could be less than 30% but if it does not 70% of the loans could turn bad. Not all of it is the fault of the banks. The fall in the rate of growth in the Indian economy resulted in a fall in profits of companies, which meant that they could not service their debts, while the steep fall in global prices led to losses for companies dealing in commodities. " We have been bitten very largely by the steel sector. So, we have decided to keep away from those sectors where we have been bitten. Apart from steel we have heavy exposure to textiles and chemicals as well....," said Usha Ananthasubramanian, MD at Punjab National Bank. Banks are forced to lend to farmers for political reasons when the share of agriculture in our GDP has been shrinking. Outstanding loans to agriculture are in excess of Rs 7 trillion, most of which will not be repaid as politicians will forgive these loans to win elections, in a criminal waste of taxpayer money. Farm households owe an average of Rs 47,000 per household. Even the public sector insurance company, the Life Insurance Corporation of India, has NPAs of 4.23%. It has a loans portfolio of Rs 1 trillion and holds corporate debentures and bonds worth Rs 2.7 trillion. The Congress forced LIC to buy shares in public sector companies to bridge its budget deficit. However, banks are not without fault. Bank managers issue loans to dubious companies in return for gifts and money. Unable to lend to industry banks are concentrating on personal loans so credit card loans are rising. A good monsoon will increase growth so that profits increase and loans can be paid off. Money from the skies, as it were.