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Opinion

Indian banks -- reform not rescue

Government must switch from refinancing state-owned banks to better regulation and privatization

| India
Punjab National Bank is alleged to have been defrauded of 130 billion rupees ($2 billion), mainly by companies associated with celebrity jeweler Nirav Modi and his uncle Mehul Choksi.   © Reuters

The winner of this year's Indian general election will face the urgent challenge of fixing India's broken financial system.

The issue is not, as commonly assumed, simply one of bad debts and bailouts. The banking industry, which dominates the country's financial sector, is riddled with structural weaknesses that have been ignored by successive governments. Without radical reforms, Indian banks will continue to be a threat to financial stability and a blight on the country's economic prospects.

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