A different kind of phone banking.

Nationalization of banks in India "in 1969 and again in 1980 achieved a larger public purpose", wrote MS Sriram, which was to provide "credit to the poor and for public investments required to boost economic development". To Sriram, public sector banks (PSBs) are better because "they have a better impact on priority sector lending achievement, and paid higher wages", whereas "private sector banks score better on efficiency and profitability parameters -- they have better return on assets, return on equity, net interest margin and a higher proportion of low-cost deposits". With the government in control, "It did not really matter if these institutions made losses. They would be recapitalized once in a while to keep them going." Therein lies the problem. Losses in depositors' money replaced with taxpayer money. Prime Minister Narendra Modi accused the Congress of "underground loot of banks" which led to bad loans, or non-performing assets (NPAs), in excess of Rs 9 trillion at PSBs. "The story of NPAs began in 2008. Before the 2009 elections Congress felt that there was a year to go so it opted to empty as many banks as possible," Modi said. Ministers would phone bank managers to lend money to their cronies or pet projects. "It was the result of this practice of telephone banking that loan flow shot up so much. Loans were handed out to their favorites." "When it was time to repay, a fresh loan was given. This cycle continued and the country and its banks were trapped in a web of NPAs." When politicians indulge in misusing public deposits, managers of PSBs also gave out loans in return for favors.This was the murky world of 'suitcase banking', wrote T Bandyopadhyay. This government seems to be copying the Congress by asking "state-run banks to hold open houses in 400 districts of the country, tasking them to extend credit to five new customers for every existing borrower". The Finance Minister also asked PSBs to loan money to "retail borrowers, including homebuyers and farmers", in a replay of the infamous 'loan melas' during the Congress era. The Finance Minister has decided to merge 10 PSBs into 4 big banks hoping that increased size will help in higher lending. In 2015, a 57 page report of Credit Suisse gave a detailed account of the formidable debts accumulated by a dozen big Indian companies," wrote C Jaffrelot. Despite this, "companies facing heavy debts continued to borrow from the banking system. The Adani group's debt, for instance, increased by 16 percent in 2015." Why? Because, political parties spent a total of $7.2 billion in this year's general elections and business leaders donated huge sums through anonymous election bonds. With retail loans showing signs of stress the BJP could be going the same way as the Congress. As long as banks are controlled by the government the temptation to spend for electoral gain will remain irresistible. That is why they will never give up control. And the crisis will continue.