Bad Loans, NPAs and the IBC
The Lending Boom and the Bust of the 2010s
Banks lent heavily to infrastructure and steel in the 2000s, and when projects stalled and prices fell, bad loans surged.
How the problem built up.
Boom
After 2004, banks financed power, roads, steel and telecom projects, often in large chunks.
Bust
Delays, land and environmental clearances, lower commodity prices and weak demand hurt repayment.
Evergreening
Some banks gave fresh loans to repay old ones, hiding stress.
Twin balance sheet
The Economic Survey of 2016-17 noted that both banks and corporates were overloaded with debt.
A stalled power plant
A plant built with heavy debt cannot get coal or buyers, and its loan turns bad.
Blaming only borrowers
Lenders' assessments also failed.
Key takeaways
- Infrastructure lending boomed.
- Stalled projects caused bad loans.
- Evergreening hid stress.
- Both banks and firms were stressed.
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