It may be rising, but it's still a fraction of every western country. India could quite easily afford to swallow ICICI if it so chose to. If it would choose to or not, is the question.

Remember, some of our banks are only afloat due to the 100s of billions our Government has chucked at them. Iceland couldn't do this, we could. India COULD, but would it?

Right now, there is no safe bank. That's because confidence is low in them all, when it shouldn't be. When you prop up one failed bank, it ruins the whole survival of the fittest thing. Everyone is a winner.

If 2 shops selling the same items setup in the same area, the most successful business will last out of the two. The business with the best advertising, best prices, best marketing, best service, etc etc etc, will survive, and the other will fail. What happens then, if the local council steps in and says "Hey, we can't have this shop failing, even though it's business model failed. HERE, take this cheap money and try again and again and again." Competition suddenly means nothing, there is no consequence to poor decisions, there is no competition. The other business would then think why they bothered to put all that work in.

It sounds ridiculous, doesn't it? However, that's exactly what's happening with banks. They messed up and the Government won't let them fail. The thing with banks is, they rely on investors. Would you want to invest in any bank right now? Nope, because you don't know which is a success, which is a failure, which has a slight risk, which has a huge risk. Because none have been allowed to fail, they are now all equally untrusted. Where as, if two or three banks fall, the others suddenly become much more attractive, as they were obviously the "stronger".

The problem with all banks right now is trust.