Crony capitalism led to banks giving loans indiscriminately:

Crony capitalism has led to state-run banks giving loans "indiscriminately" to "favoured big corporates", the CPI(M) said today, demanding a review of the "whole direction" of the banking sector under the neo-liberal regime.
"The promotion of crony capitalism meant that public sector banks were indiscriminate in lending to favoured big corporates.
"The failure of private investment-led infrastructure development is now evident in the huge amount of NPAs (non-performing assets) owed by the big infrastructure companies like ESSAR, Jaypee, GMR, Reliance ADAG, Adani, Lanco and others," former CPI(M) general secretary Prakash Karat said.
"The whole direction of the banking sector under the neo-liberal regime needs to be reviewed," he said.

Karat made the observations in the editorial of forthcoming issue of party mouthpiece 'People's Democracy'.
Maintaining that the loss of revenue sustained by the banks due to bad loans was eventually passed on to small loan takers, he said the government and the RBI "must give a direction to ensure that the big corporates who are the main borrowers repay the loans given by the public sector banks within a reasonable timeframe."

Referring to RBI's Financial Stability Report which stated that burden of bad loans has worsened in last six months, CPI(M) also sought to know what penal action will be taken against those corporate houses which do not repay loans.

He said the gross non-performing assets (NPA) ratio has risen "sharply" from 5.1 per cent in September, 2015 to 7.6 per cent in March this year.
The share of large borrowers of gross bad loans increased to 86.4 per cent and their share of total loans is 58 per cent in March 2016. According to one estimate, corporate debt worth Rs 6.7 lakh crore is facing the risk of default, he added.
"This plight of banking sector is a result of the neo-liberal push by UPA-II government and present Modi government to extend lending on generous terms to the private companies in infrastructure," Karat said.

The response of the government to the situation, he alleged, was to get the public sector banks to write off loans of the chronic defaulters. Karat noted that loans worth Rs 1.14 lakh crore were written off between 2013 and 2015 by them.
"Recently, the Reserve Bank of India, under pressure, decided to publish the names of such willful defaulters. But the main issue is what penal measures will be taken to recover these loans through takeover and sale of the assets of these defaulters," he asked.
Stating the Narendra Modi government is giving a renewed push for privatisation, the CMI(M) leader said such moves will only "worsen the situation further".