₹14.5 Lakh Crore Vanished! – Is Your Rupee Safe?
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MARCH 2025
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In India, it is becoming increasingly difficult to ignore the country's economic situation, particularly the fundamentals of its economy, such as manufacturing and banking.
Since 2014, a significant number of banks in India have either shut down or merged to improve their financial viability.
A total of 60 cooperative banks, both rural and urban, have closed due to their failures. In 2023 alone, 17 cooperative banks were shut down—the highest number in any single year.
As of 2023, 39 urban cooperative banks are facing insolvency under the Banking Regulation Act due to negative net worth and severe financial irregularities.
In the public sector, multiple bank mergers have taken place since 2019, reducing the total number of public sector banks.
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In 2023 alone, 17 cooperative banks were shut down...
For instance, Punjab National Bank (130 years old) merged with Oriental Bank of Commerce (82 Years old) and United Bank of India (75 years). Canara Bank (119 years) merged with
Syndicate Bank (100 years), and Union Bank of India (106 years) merged with Andhra Bank (96 years) and Corporation Bank (114 years).
Additionally, Indian Bank (117 years) merged with Allahabad Bank (160-year-old). If we look at 2022 alone, public sector banks closed nearly 2,000 branches due to mergers and rationalization efforts.
The historical significance of these banks in India is immense and priceless, particularly those that survived significant challenges like World War I, World War II, and various economic downturns.
These banks were deeply intertwined with India's socio-political movements, especially the independence struggle.
Many of these institutions played pivotal roles in supporting the Indian independence movement and were founded by visionaries who were aligned with the freedom struggle leaders of the time.
Through their existence, these banks witnessed the transformation of Indian society, from the harsh realities of British colonial rule to the complex dynamics of a newly independent nation.
They served as bridges, integrating various sections of Indian society, including rural and urban populations, as well as the rich and the poor.
However, this long-standing legacy has come to an unfortunate emotionless end, which could refer to the consolidation, nationalization, or collapse of these institutions, losing their historical value and significance in the modern banking world.
The large-scale mergers and closures of public sector banks in India reflect a broader political and economic shift.
Historically, these banks were established with a vision to serve the common people, playing a critical role in nation-building and financial inclusion.
Their deep connection to India's independence movement and post-colonial economic policies symbolized a state-led development model.
Further, their consolidation signals a departure from this approach, aligning with a more corporate-driven and centralized banking structure.
Politically, this shift raises concerns about reduced financial accessibility for marginalized communities, increasing privatization, and the diminishing role of public sector institutions in shaping India’s economic sovereignty.
So, what exactly is happening with Indian banks, and is our money safe? Is the Indian banking system a forerunner to the upcoming financial crisis in India?
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...and the diminishing role of public sector institutions in shaping India’s economic sovereignty
Reports suggest that around 80 banks have shut down in the last decade, beginning with small institutions.
The latest bank in trouble is the New India Cooperative Bank, Mumbai, which has 30 branches and has been caught in a financial fraud.
Depositors are unable to access their funds and will receive only ₹5 lakh ($5,800) as deposit insurance, regardless of their total deposits. This is devastating news for them.
Another bank under scrutiny is IndusInd Bank, which has failed to match its books by ₹2,000 crore ($250 million).
An investigation is underway, and the real reasons behind this discrepancy will soon be revealed.
The State Bank of India (SBI), the largest and most reputed Indian bank, has been embroiled in the electoral bond controversy.
Discussions around this issue have raised concerns about how such scandals impact investor confidence in the Indian banking system.
This could be one of the key reasons behind the exodus of foreign direct investments from India.
About five years ago, Punjab and Maharashtra Cooperative Bank (PMC), which had 17 lakh (1.7 million) depositors, was shut down due to financial mismanagement and discrepancies.
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This could be one of the key reasons behind the exodus of foreign direct investments from India
Many depositors lost their savings, and it remains unclear whether the government was able to compensate them beyond the deposit insurance limit of ₹5 lakh ($5,800).
Among the many banks facing financial difficulties, the majority are cooperative banks. The regulation and oversight of cooperative banks fall under the purview of Amit Shah, who also serves as the Home Minister.
This raises questions about the role of investigative agencies like the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) in addressing the persistent financial irregularities in the banking sector.
It is widely known that most cooperative banks are either run by politicians or have strong political connections, leading to a serious conflict of interest at the cost of Indian depositors.
Another unfortunate reality is that the primary victims of bank failures are small and middle-class depositors, particularly those banking with cooperative institutions. When these banks shut down abruptly due to financial mismanagement, the impact on economically vulnerable sections of society is devastating.
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...primary victims of bank failures are small and middle-class depositors...
A decade ago, India's total loans stood at ₹52 lakh crore ($604.7 billion) when the GDP was growing at 7.2%. By 2025, the loan burden has multiplied fivefold to approximately ₹270 lakh crore ($3.1 trillion), while the GDP growth rate has declined to around 6.4%.
This growing disparity is making debt repayment increasingly difficult, putting banks under pressure due to rising defaults.
The health of the banking system is a direct reflection of the economy, and the current indicators are worrying.
Fundamentally the banks are dependent on deposits, home loans, auto loans, student loans and business loans.
If you look at these closely, the retail saving is down so deposits are down, The household savings rate is at an all-time low, impacting the retail banking system.
According to Business Standard, in cities like Mumbai, Delhi, Hyderabad and Bengaluru,10 Lakh (1 million) housing units are standing unsold, so home loans are down, the non-premium
automobile industry is down so auto loans are under pressure, The Student Loans are in default because the freshers are not getting job due to high unemployment and business loan is sliding because the manufacturing and related business activities are under stress.
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...Mumbai, Delhi, Hyderabad and Bengaluru,, 10 Lakh (1 million) housing units are standing unsold...
For those advocating Sanatan Dharma, particularly in the ruling party, this decline in savings contradicts traditional values.
Furthermore, more people are taking loans against gold, which is traditionally seen as a bad omen. Alarmingly, defaults on gold-backed loans are also rising, further aggravating financial concerns.
The microfinance sector is also struggling, with defaults occurring even on small loans ranging from ₹100 ($1.16) to ₹500 ($5.81). This indicates financial distress across different segments of the economy.
Whether it is public sector banks writing off massive amounts of bad debt, cooperative banks shutting down, or small banks struggling to survive, the overall picture of the Indian banking system appears grim.
This situation has persisted for a while now, primarily because the economy is shrinking.
While GDP growth is currently 6.4%, to significantly reduce unemployment, India needs a growth rate of 10-12%. Given the present policies and economic outlook, achieving such high growth seems highly unlikely.
Since 2014-15, banks have written off a staggering ₹14.5 lakh crore ($168.6 billion) in non-performing assets (NPAs). The NPAs stood at ₹9 lakh crore ($104.7 billion), and after write-offs, they have reduced to ₹4
lakh crore ($46.5 billion). While this might appear to be a strategy to make banks healthier, the method raises concerns.
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...banks have written off a staggering ₹14.5 lakh crore ($168.6 billion) in non-performing assets (NPAs)
Of the ₹14.5 lakh crore ($168.6 billion) written off, loans to large industries and companies account for approximately ₹7.5 lakh crore ($87.2 billion).
However, the number of farm loans written off remains unclear. This needs closer scrutiny, especially considering the rising farmer suicides, a crisis that has received little attention in recent discussions.
Just last year, SBI alone wrote off ₹1.5 lakh crore ($17.4 billion) in bad loans, while Punjab National Bank wrote off ₹90,000 crore ($10.5 billion). This trend suggests that even public sector banks are being drained of their financial strength.
The write-off of bad loans tends to disproportionately benefit large corporations and politically connected businesses, leading to:
Accusations of crony capitalism and double standards in financial regulation.
Resentment from taxpayers, small businesses, and the general public.
Growing distrust in financial institutions and governments.
In January 2024, Reliance Communications, owned by Anil Ambani, had a debt of ₹47,251 crore ($549.4 billion).
However, the company paid back less than 1% of this amount, Rs 455 Crore ($50 million) with the remaining debt being written off by the banks.
Given Anil Ambani's well-known political and business connections, this raises serious concerns about favouritism and financial irregularities.
This is one of the highlighted case.
There are many more. One can conclude that Indian public sector banks are increasingly becoming instruments of financial mismanagement, benefiting the rich and powerful at the expense of middle-class and working-class taxpayers.
The irony of the situation is, only if Indian farmers had the same privilege of having their loans written off with just 1% repayment, many of the suicides caused by financial distress could have been prevented.
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Between 2014 and 2022, India witnessed over 100,000 suicides among farmers...
Between 2014 and 2022, India witnessed over 100,000 suicides among farmers and individuals working in the agricultural sector.
In 2022 alone, 11,290 farmers and farm laborers were reported to have taken their own lives.
In the Vidarbha region of Maharashtra, which has been notably affected, 26,566 farmer suicides were recorded between 2013 and 2022, averaging seven suicides per day.
The trend persisted in 2023, with 2,851 suicides, and continued into the first half of 2024, during which 1,267 cases were reported.
Millions of struggling farmers could have been better supported in feeding India’s growing population.
While bad loan write-offs should NOT be necessary part of risk management in banking, especially when the perception that corporations and the wealthy benefit unfairly while the common people suffer.
This systemic issue is nothing short of a disease within the Indian banking system.
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