PSB crisis: Strengthening India's banks

The government needs a clear vision for the future of India's banking sector, one in which state-owned banks play a smaller role

The Chinese and Indian economies have grown rapidly over the last decade. In China, this growth has been fuelled by a dramatic expansion of credit, up from 140 per cent of GDP in 2008 to 260 per cent today. Credit has also expanded in India over the last decade, but it started from such a low base that private sector debt is now only 86 per cent of GDP — less than half the average of advanced economies.
 
Given this difference, you might expect Chinese banks to be struggling with bad debt while Indian banks enjoy the stability that