Monday, February 29, 2016
Bank recapitalization fund below expectations
The Budget proposal of Rs 25,000-crore recapitalisation for public sector banks has fallen short of expectation as the amount may not be enough to cover the stress these banks are going through after the regulator driven recognition.

The rise in provisions and fall in profits have strained the banks' capital and pulled down their capacity to lend.

Under a massive clean-up exercise directed by the Reserve Bank of India, banks made proactive provisions on stressed loans. The additional provision is estimated to be around Rs 70,000 crore spread over the December and March quarter. Morgan Stanley estimated that Indian banks would require Rs 2.5 lakh crore of capital by 2019 while the government estimated it at Rs 1.8 lakh crore.

The central bank has told banks to clean-up balance sheet by March 2017.

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