Banking sector warnings, fiscal deficit target doubts

India’s authorities have recently received plaudits for their efforts to clean up the banking sector. But news this week of a fraud scandal at the Punjab & Maharashtra Co-operative Bank (PMC Bank) is a stark reminder that more still needs to be done to ensure the banking sector’s long-term health. Meanwhile, the fiscal deficit in the first five months of FY19/20 provides little assurance about the government’s ability to meet the 3.3% target that it set in the union budget. We think that the finance ministry will eventually be forced to relax the target yet again.