One of the biggest challenges facing India (other than enough jobs) is the mess of its banking industry. After throwing open the sector in the early 1990s, private sector banks have captured a 30 per cent share in deposit and lending, but the industry is still dominated by PSU banks.

PSU banks are subject to ‘directed lending’, granting loans to favoured customers, under instructions from politicians. The top 10 industry houses today owe a whopping ₹5 lakh crore to banks. High non-performing assets (NPAs) are preventing banks from lending more, resulting in low credit growth.

Tackling these non-performing loans is one of the Augean stables that need to be cleaned. Last week, the government passed an ordinance that gave powers to the RBI to compel banks to act against defaulters.

The ease with which some banks granted banking facilities was recently brought out in the Enforcement Directorate case against one Vijay Choudhary who defrauded some PSU banks of ₹2,600 crore.

Another problem is the perpetual threat of scrutiny of a commercial decision by the CVC, making management of even the good banks averse to settling with borrowers. This needs to change.

Discretionary judicial action also needs to change; law must be equal. Whilst Lalu Prasad Yadav is to face trial in the fodder scam, as he ought to, action is slow to recompense victims of Ponzi schemes such as Rose Valley, in which a TMC party leader has been chargesheeted by the CBI as being involved as a promoter.

Why can’t the courts and investigative agencies move fast to recompense duped investors of Rose Valley, as it is for, say Sahara? Similarly, the CBI has found that NSEL promoter Jignesh Shah has floated nine shell companies and diverted proceeds from NSEL to these firms. Why do investigations and court proceedings linger? Does the judiciary not have a soul?

FM Arun Jaitley recently said that there are few rich farmers, and so no agricultural tax was being contemplated. This is factually and logically incorrect. According to an article, in the year 2010-11 and 2011-12, there were 6.5 lakh and eight lakh assesses who filed agricultural income totalling of ₹200 lakh crore and ₹674 lakh crore. The figures boggle the imagination, being higher than India’s GDP. But why doesn’t the Patna HC move fast in adjudicating in this case?

Logically, if there are, truly, few rich farmers, then what is the objection to taxing them? But if, as suspected, tax-free agricultural income is simply a laundry to cleanse black money, then the remarks of the FM are ominous, indicating, as they do, an unwillingness to tackle the menace.

The good news is that the weathermen have forecast a good monsoon, and a 15 per cent growth in farm production. This translates to an addition of 2.1 per cent in GDP. Overall, the India story looks very good, provided the Augean stables are cleaned fast.

(The writer is India Head — Finance, Asia/Haymarket. The views are personal.)