Root cause of India's banking crisis: A non-existent corporate bond market

Both banks and India Inc have incentives to stop the creation of a bond market

This quarter, all public sector banks (PSBs) returned losses and many have sunk deeper into the quagmire of bad loans. Even the private sector banks, hitherto considered as poster boys of efficiency, have shown increased non-performing assets (NPAs) of 2 per cent to 5 per cent of their advances, with enhanced provision of Rs 1.05 trillion (doubled from Rs 436 billion from the previous year).

Recent examples of conflict of interest and adventurous lending in some private sector banks point to the fragility of their operations.

Private banks which took a leaf out of the page of the PSB playbook from