What is public is private. Or is it the other way round?

"The roots of the current crisis in our banks, therefore, lie in the great boom of 2003-08, which was then prolonged in India by a fiscal and monetary stimulus," wrote M Chakravarty. Bank credit rose from 19.2% of GDP in 1991-92 to 51.64% of GDP in 2016-17. The share of public sector banks in total outstanding credit rose to 46.72%. The State Bank of India with its associates, also government banks, had an exposure of 24.1%, which was greater than 21.42% of all private banks. The combined fiscal deficits of center and state governments rose to 9.3% of GDP in 2009-10, corporate profits dived and the share of bad loans in government banks rose to 68.3% of the total. The problem of bad loans in public sector banks is due mainly to two reasons, wrote Prof N Kaushal. One is that the government uses public sector banks to finance social schemes, such as farm loan waiver. Those farmers who have repaid their loans feel aggrieved, resulting in farmers borrowing with the expectation of not having to repay. However, all political parties resort to this to win elections. The other reason is that officials of government banks never lose their jobs, even after conspiring to lend large sums to dubious business fellows. Now, it seems that even private banks are not immune to shady practices. The CEO of Axis Bank, Shikha Sharma was appointed for another 3-year term, starting in June 2018, but the RBI has asked the board of the bank to reconsider her reappointment because of the poor performance of the bank and not disclosing it bad loans fully, wrote T Bandopadhyay. Not disclosing bad loans means that the bank was able to show higher profits, which may have led to higher dividends for shareholders. Recently, the CEO of ICICI Bank, India's largest private bank, Chanda Kochhar has been accused of facilitating a loan to a business house associated with her husband and brother-in-law. What are the sharp practices that private banks indulge in? One is to give a fresh loan loan which is used to repay an old loan, a practice known as 'ever-greening'. A second is to give a loan to another company with the understanding that it will be passed on to the company in distress. A third is to show a lower interest rate and to take the difference as a fee to increase profits for the year. The bank sanctions a higher loan to cover the fee. By diluting risk management private banks try to hide bad assets. Officials of public sector banks cheat for small amounts but the highly paid officials of private banks go for very large gains. Banks are staring at $38 billion, around Rs 2.5 trillion, in bad loans in the power sector. That is because state governments promise free electricity to farmers to win elections. When governments use our deposits for handouts it is no wonder that people panic when they want  to limit banks' liability to Rs 100,000, the dreaded 'bail in' clause in the FRDI bill. Public and private all mixed up.