Question

    The "Twin Balance Sheet Problem" in India refers to the

    stress on which two sectors?
    A Banking and Real Estate Correct Answer Incorrect Answer
    B Government and Corporate Correct Answer Incorrect Answer
    C External and Internal trade Correct Answer Incorrect Answer
    D Agriculture and Manufacturing Correct Answer Incorrect Answer

    Solution

    The "Twin Balance Sheet Problem" was a significant issue faced by the Indian economy. It refers to the stressed balance sheets of both the banking sector and the corporate (mainly, real estate) sector. In this situation, many Indian banks had a high level of non-performing assets (bad loans), which impaired their financial health. Simultaneously, some real estate companies were burdened with high levels of debt and unsold inventory, leading to financial stress. The interlinkage of these stressed balance sheets created a challenging situation for the overall economy, affecting credit availability and investment.

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