Why aren’t banks lending more?

Recent cuts to policy interest rates should eventually help to boost bank lending in India, the weakness of which has been a significant cause of the economic slowdown over the past few years. But while lower interest rates on loans will help, concerns over existing levels of debt are likely to remain a major constraint. Banks are in need of significant capital injections to get lending going again, and the most effective method to achieve this would be for the government to privatise large parts of the sector.