"The present troubles have their roots in 2005-12, when state banks went on a lending bender, extending credit to dubious tycoons and to infrastructure projects. Net bad debts are 9% of state banks’ loan books. The government has not properly recapitalised these zombies and the flow of credit from them has slowed. Accidents keep happening. In February pnb, the second-biggest state lender, disclosed a $2bn fraud involving diamond merchants."

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