First, the basics. South Korea is reeling because its banks invested in projects whose return was less than their cost of money. That is like taking a loan at 9% and investing it in a CD paying 4%. At some point, you are going to go broke. Why would the banks do that? Because the Korean economy is dominated by a bunch of cozy wheeler-dealers. Nobody checked anything before loaning money. In all this, you should not lose sight of one fact -- the money was invested in things that are productive. Less than 10% of Korea's imports were consumer goods; more than 90% went into factories, plants and infrastructure. Many of the projects will be ultimately profitable.
India? Well, India is another story. I would love to tell you that the reason India's currency is not collapsing is because Indian banks are more cautious and that the projects they invest in are more profitable. Sadly, that is not the case. The corporations are more inefficient than in Korea. The banks are as subject to political pressure. There are lots of bad loans and scandals lurking. However, there has been no march toward growth. Consequently, no investments in infrastructure of the scale of Korea have been made. Most of Indian imports are consumer goods. There won't be a currency collapse because there was no run-up.
India's currency is stable not because it has avoided Korea's mistakes but because it has avoided Korea's strengths also.
