21st October 2017
The laws of economics can NEVER be violated without paying the full cost.
I’ve commented on India’s socialist financial system many times in the past, including the damage caused by loan waivers for farmers.
A commentator has raised two key issues regarding the sorry state of the Indian economy on my blog – all driven by the socialist model where almost the entire banking sector is government owned:
a) Top 500 manufacturing companies hold 93% of bank debt, and much of it is non-performing:
“we are moving from bad to worse and no signs of recovery. As a financial analyst i have some statistics * – the top manufacturing 100 Companies of the country is about 3% in number and has 65% of the assets and about 68% of the Bank Debt. A large part of it is NPA. if we take top 500 companies it is around 15% in number cornering 82% of assets and about 93% of overall debt.A big part of it is NPA.”
b) Debt to such companies is much more risky than debt for home loans, but India’s nationalised banks issue corporate debt at the same rate as they do for home loans:
“Ordinary tax payers , honest employees really look forward for one asset probably . A home . ROI on it is around 9%. is there a risk of non payment of the loan . Most Probably Nil unless it is involved in a scam which in case of honest is ruled out . What is the risk in 82% of assets covering the 93% of overall debt in our country . Higher or lower ??? . Most told me it is higher compared to Home loans . Then why is it that the loans have been given to many companies at close to MCLR??”