The banks that dominate the Indian banking sector are getting ready to take advantage of the government’s crackdown on illicit black money.
The Indian banking industry is one of the biggest beneficiaries of the clampdown.
The Reserve Bank of India said it will begin imposing capital restrictions on large and medium-sized banks by the end of this month.
It said it plans to target “non-performing assets” of up to Rs.10 trillion ($2.5 trillion).
These include assets that have been used to launder money or to evade tax.
The move comes as the government seeks to crack down on the countrys biggest black money earners, which are largely linked to drug cartels and organised crime syndicates.
The government has also been trying to close the black market of foreign currency and to clamp down on financial flows to India.
But the banks are benefiting from the crackdown, which has been spearheaded by the Finance Minister Arun Jaitley.
Mr Jaitsey has been pushing to reduce the black money that is flowing into the country.
He has been working to ensure that the black wealth flows to the country and to help those who need it.
The RBI’s latest figures show that the total black wealth inflows into the economy have fallen from Rs.8,726 crore in June to Rs 2,913 crore in August.
These have been partially offset by a drop in the black value of foreign exchange.
In September, India’s black money rate fell to 1.15 per cent, the lowest rate in a decade, from 2.15 in May.
The figures, which come just weeks after a key IMF meeting in which the IMF chief Christine Lagarde urged India to “move towards a more stable and sustainable financial system”, have prompted concerns that India is sliding towards financial chaos.