There has been a lot of talk in the last few months about the failing financial system in India – from the announcement of public bank recapitalisation last November, to declarations of increasing numbers of non-performing assets across the banking sector, to the Nirav Modi scandal that rocked the nation. But, just how vulnerable are the banks? Should we really be scared, or has it all been hyped out of proportion?

In the new episode of “The Capitalmind Show”, Deepak Shenoy tackles these issues head on. Have the banks been mismanaged? Of course they have. Due to the near impossibility of shutting down, public sector bank managers have been taking on unnecessary risks without the fear of repercussions. At worst, these banks will be consolidated to make one larger bank with employees accommodated in the new company.

In fact, Shenoy believes that the long term vision for Indian banks is actually quite positive. Despite the big loan problem across the banking sector, smaller private banks have a lot to gain by larger public banks becoming more fiscally conservative. After all, the debt that public sector banks are owed is alone double or even triple the size of entire private sector banks.

For example, even Yes Bank – who were notoriously pulled up by the RBI for their own loan problem in the back end of last year – will grow if they can take on some of the clients that will be moving on from public banks.

Additionally, Shenoy believes that increasing number of banks that are being pulled up by the RBI for NPAs is a good development. This doesn’t prove that there are more banks being careless. Rather, it proves that the governing body is now becoming more adept at finding these problems within the banking sector.

You can listen to the video as a podcast here.

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Tarutr swears that he is interesting despite focussing on business strategy and economics. No one believes him.

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