Why India’s debt waivers are sugar-coated poison

India has developed a habit of granting loan waivers and writing off debt. Here is why it could create a vicious cycle that damages the entire credit system.
India's banking system credibility is at stake following the Nirav Modi scandal
India's banking system credibility is at stake following the Nirav Modi scandal

If you lend money to someone, you expect the payment to be settled and hopefully on time. But in India, that is not always the case.

In what could be the biggest bank fraud in Indian history, government-owned Punjab National Bank PNB last month uncovered up to $2 billion in unauthorised loans made to diamond jeweller Nirav Modi over the past seven years.

PNB was accused of granting new loans to Nirav Modi every time a loan was due. In practice, the jeweller never needed to repay the amount since the new loan granted was sufficient to cover the principal owed plus the interest incurred.

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