INTRODUCTION

An impoverished writer borrows money from several former college friends after finding him­self unable to repay a debt. The debt takes on a circular nature where the creditors owe money to each other but the writer walks away (By Shibram Chakraborty, retold by Kaushik Basu to James Lemont).

The official perspective put forth by the econo­mists of the Reserve Bank of India (RBI) towards non-performing loans is that political, economic, social, technological, legal, and environmental fac­

tors contribute to the problem of non-performing loans in the credit portfolios of banks in India. In the winter of 2003, the RBI articulated in a note of caution that the domestic banks need to take sufficient care in terms of framing appropriate lending policy such as to dare the borrower to default. This note of caution still remains relevant because a sharp deterioration of the loan quality of the major banks of India led to deterioration of India’s global credit rating at the end of 2012. Hence, there is a need to analyze the different forms of actions and games of the banks and their corporate borrowers.

DOI: 10.4018∕978-1-4666-6268-1.ch022

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