Indian banks have accumulated risks well before 2010. They had gone largely undetected by both regulators and markets until liquidity events or regulatory events such as AQR made it difficult to keep rolling over the bad debt. The Government of India and the Reserve Bank of India (RBI) have had to react with policy measures with thus far, mixed results. This tactical, reactive approach is unsustainable as it distorts credit markets, not to mention, credit blow-ups are becoming a regular feature.
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