A Lurking Crisis
By Rasika Gynedi
APR 1, 2014
Asset quality in India’s banks has deteriorated sharply and if not tackled promptly poses a systemic risk to the banking system—and by extension the Indian economy. A high proportion of nonperforming assets (NPAs) steadily erodes the capital base of a bank, impinging on the ability of banks to raise fresh capital and continue lending for investment activities. Indeed, the spillover impact from banking crises to the real economy is all too familiar, evinced by the subprime mortgage crisis in the United States. However, despite this risk, the issue is not garnering sufficient attention outside the banking industry.
Rasika Gynedi is a researcher with the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies in Washington, D.C. She worked as an economic research analyst with Yes Bank in Mumbai, prior to which she was an investment banker with State Street Corporation in London. She holds a master’s degree in economics and finance from the University of Bath in the United Kingdom.
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