Why are Private Sector Banks in India Failing?

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Why are Private Sector Banks in India Failing?

The economic slowdown post-COVID-19 may not be the only reason why private sector banks in India are failing.

In 2020, you may have seen popular private banks such as YES Bank and Lakshmi Vilas Bank come into the limelight for the wrong reasons. While RBI has been able to salvage the situation for these two banks, there are quite a few small lending institutions that have not been so lucky. It is a cause of concern and raises questions about the regulation of banking sector in India.

  • In the rush to attract customers and sanction more loans, these banks may have sanctioned loans carelessly
  • Continuing from the first point, unrestricted credit growth paired with poor supervision may have also played a huge role in the downfall of these institutions
  • Some unlawful associations and dishonest dealings, that were unearthed during investigations, clearly played a role in badly affecting the long-term sustainability and growth of these financial institutions.

These are just three of the many factors that may have played a role in the downfall of some private lending institutions. Do you agree?

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