Chapter 8 · 2 of 15
Banks
A hidden bad-loan mountain, forced into the open — and the bill that came with the cleaning.
Banks Rupture, paid for
BEFORE AFTER
Before → after
Gross bad-loan ratio
Before 11.18% peak, Mar 2018
After 2.1% Sept 2025 — multi-decade low
Public-sector banks' result
Before −₹85,390 crore loss, FY18
After ₹1,78,364 crore record profit, FY25
Taxpayer recapitalisation
Now ₹3.11 lakh crore FY17–FY21
Loans written off
Now ₹16.35 lakh crore FY15–FY24
Public-sector banks
Before 27 2017
After 12 since April 2020
Deposit insurance
Before ₹1 lakh set in 1993
After ₹5 lakh 2020
Gross bad loans, % of all bank lending The 2014 figure hid double-digit true stress inside 'restructured' loans.
The bankruptcy code: courtroom vs threat, ₹ lakh crore Recovered via resolution plans
3.9 ₹ lakh cr
Settled before admission
13.78 ₹ lakh cr
The threat has recovered three and a half times more than the machine.
One person, before and after
A
Ashok a mid-career officer at a nationalised bank A composite — built from thousands of real accounts. 1 2013 Ashok, bank officer. A steel firm stops paying.
2 2013 He's told to 'restructure' it — call it healthy.
3 2018 New rules. The same loan goes to a tribunal.
4 2018 The owner may lose his company.
5 2025 Ashok's branch: record profits.
6 2025 The big-company loan desk: still quiet.
Before 2014 Most banks are government-owned since 1969. Good: branches in villages, credit for farms. Bad: lending on political instruction. 2004–08 boom: lending grew ~30% a year. Worst loans were made in 2006–08. Losses hidden by 'restructuring'. 2013 on paper: 4% bad loans. In reality: double digits. After 2014
Forcing the truth (2015)
11.18% peak bad loans, March 2018
RBI made banks admit every bad loan. State banks: 14.58% — one rupee in seven. They lost ₹85,390 crore in one year. Lending hit a 60-year low.
Bankruptcy law (2016)
₹13.78 lakh cr settled before even reaching court
Default now can cost owners their company. Court recoveries: ~₹3.9 lakh crore (~32%). Cases take ~600 days, not 330. The threat recovered 3.5× the courts.
Frauds and flight
₹22,586 cr Mallya, Nirav Modi, Choksi
₹15,000+ crore recovered by banks. None of the three brought back.
The bill
₹3.11 lakh cr taxpayer money into state banks
27 state banks merged into 12. Private banks took most new growth. State banks' share: 70%+ → ~55–58%.
Crashes on the way
₹91,000 cr IL&FS default, 2018
Shadow banking froze; 2019 slowed. PMC Bank collapsed (2019). Yes Bank rescued (2020). Deposit cover: ₹1 lakh → ₹5 lakh.
The turn
2.1% bad loans, Sept 2025 — lowest in decades
State banks earned ₹1.78 lakh crore. All 12 profitable. New worry: unsecured personal loans. Still fighting about
1
Whose mess was it?
Government's case Bad loans were made in the UPA years. 'Phone banking' — loans on political calls. This govt finally counted honestly. VS
Critics' case Banks worldwide lent badly in the boom. Court cancellations killed many projects. The new govt chose when to switch on the lights.
The book: Every side owns a piece of this one.
Where do you lean?
Government Both hold Critics
2
Write-off or quiet waiver?
Government's case Write-offs are accounting, not forgiveness. ₹2.27 lakh crore recovered after write-off. Banks now pay the public back. VS
Critics' case ₹16.35 lakh crore written off. Under 1 rupee in 5 recovered. Big borrowers' names stay secret.
The book: Same ledger. One side sees surgery; the other sees who got billed.
Where do you lean?
Government Both hold Critics
3
Fixed for good?
Government's case Owners now fear losing their companies. Bad loans at multi-decade lows. VS
Critics' case Creditors still lose two-thirds on average. The fugitives are still abroad. A new retail-loan boom is building.
The book: The stable is clean. Stables don't stay clean by themselves.
Where do you lean?
Government Both hold Critics
The verdict
Banks Rupture, paid for Rule 3 Strongest verified FOR Bad loans 11.18% → 2.1%; record profits
Strongest verified AGAINST ₹16.35 lakh crore written off; the celebrity defaulters abroad
Yours
The book gives none. Slide; it is saved to your scoreboard on this device.
Clearly worse Worse No real change Better Clearly better
Read the full chapter — the book’s own words
One more thing happened while the stable was being cleaned. Every Indian was given a bank account, a biometric identity, and — thanks to a price war launched by one industrialist in September 2016 — cheap data on a smartphone. What those three wires did when they touched is the most genuinely new story in this book: Chapter 9, Digital India.