here is an article by Balakrishnan….about PSU banks ..must read.

The Regulator has such amazing protection schemes for the banks..that you will not even believe it.

Hospitals are treated as REAL ESTATE business and hence charged 14.5% interest rate per annum. Now the same thing is applied to somebody trying to run an Geriatric Center – meant for people over 85 plus years of age.

Now if an old person has say Rs. 10L which he needs to keep in a fixed deposit, he has 2 choices – he can give a loan to the bank (at 9% interest) or give a loan to the O A Home (at say 11% p,a).

So the logic is that the old people cannot keep a FD with the company – violation of sec 58A of the …

So…..and what else could  be done?

so the arbitrage that a bank in India gets is huge. So this has to translate to large profits for the banks, right?

Right and wrong. Indian banks have one of the finest NIM in the world, but not enough profits. Does this sound contradictory? Well it is not. Our psu banks lend money in a careless manner – or in a corrupt manner. Both these actions result in a high amount of NPA (non performing assets) – that erodes profits.

One more dangerous lending that they do is to builders. Builders use this money to buy land and play a waiting game..the margins in the construction business allows them to sit on projects for years on end. So we end up buying MORE expensive houses, with bigger loans from the same banks!

What about the private sector Indian banks? This is another myth. Hdfc bank, Icici bank, ..etc. are foreign banks under the garb of Indian banking. All of them have 70% of more shareholding from FIIs. Look at the margins of these banks – RBI ensures a very high profitability indeed!

So what can you do about all this? Well nothing take a position in the bank nifty, that is all.


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  1. There was some issue with opening the link. Looks like it appends a “%20” at the end. Deleting it and hitting enter takes to the blog…

  2. Though they are lending to builders, But builders are paying interest on right time. How it will be translated as in NPA? or is it by chance of default in the form of end consumer? am i missing something.

  3. NIM-Net Interest Margin- difference between at what bank lends and at what bank borrows
    lending to builders result to higher prices to end users, not necessarily increasing NPA, but lending to other industries careless/corrupt manners already resulted high NPA

  4. NIM stands for Net Interest Margin.
    It is difference between the Interest paid & Interest earned by the bank.

  5. These NPS are paid by All of us in terms of infusion of mouney to banks from Goverment ( again people’s money)

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