Bank recapitalisation plan will safeguard economic future: RBI chief

This step has been taken in a time of sound macroeconomic conditions for the economy on other fronts, said Urjit Patel

GN Bureau | October 26, 2017


#Reserve Bank of India   #RBI   #Urjit Patel   #Banking   #Recapitalisation  


A well-capitalised banking, and in general, financial intermediation, system is a pre-requisite for stable economic growth, said RBI governor Urjit Patel who added that economic history has shown us repeatedly that it is only healthy banks that lend to healthy firms and borrowers, creating a virtuous cycle of investment and job creation.

The government of India’s decisive package to restore the health of the Indian banking system is in the view of the Reserve Bank of India (RBI), a monumental step forward in safeguarding the country’s economic future.

“For the first time in last decade, we now have a real chance that all the policy pieces of the jigsaw puzzle will be in place for a comprehensive and coherent, rather than piece-meal, strategy to address the banking sector challenges. It bodes us well that this step has been taken in a time of sound macroeconomic conditions for the economy on other fronts,” Patel said in a statement.

The proposed recapitalisation package for the banking sector combines several desirable features. First, by deploying recapitalisation bonds, it will front-load capital injections while staggering the attendant fiscal implications over a period of time. As such, the recapitalisation bonds will be liquidity neutral for the government except for the interest expense that will contribute to the annual fiscal deficit numbers.

Second, it will involve participation of private shareholders of public sector banks by requiring that parts of the capital needs be met by market funding.

Last but not the least, it will allow for a calibrated approach whereby banks that have better addressed their balance-sheet issues and are in a position to use fresh capital injection for immediate credit creation can be given priority while others shape up to be in a similar position. This provides for a good way of bringing some market discipline into a public recapitalisation program compared to the past recapitalisation programs.

Patel said that financial sector policies should support growth while maintaining financial stability and added that the RBI looks forward to working with the government to ensuring these plans reach their natural completion to the benefit of the broader Indian economy.

Comments

 

Other News

Accuracy more important than speed in news: Anurag Thakur

Presenting authentic information is the prime responsibility of media and that facts should be properly checked before they are put in the public domain, union minister of information and broadcasting Anurag Thakur has said. “While speed with which the information is transmitted is imp

FM concludes pre-budget consultations

Union minister for finance and corporate affairs Nirmala Sitharaman has concluded the pre-budget consultation meetings for Budget 2023-24 that were held from November 21 to 28 in the virtual mode. More than 110 invitees representing seven stakeholder groups participated in eight meetings sch

Coal production rises by 18% to 448 MT

The total coal production in the country stands at 448 million tonnes (MT) for the month of October 2022 which is 18% higher than the production of the corresponding period of last year. The growth of coal production from Coal India Ltd (CIL) is also more than 17%. The ministry of coal said

How to execute large-scale social impact projects

The number of social innovators and entrepreneurs has considerably increased recently in India. The idea of social entrepreneurship, which aspires to provide novel solutions for the world`s most critical social issues, is now receiving more attention. Challenges like overworked healthcare,

Plastic is no longer a waste management issue

Plastic is arguably the most ubiquitous material of our times. In this Age of Plastic, it might seem its use can’t go up any further – and yet it keeps going. Between 2000 and 2015, global production of plastic increased by a whopping 79%. The total mass of plastics on our planet is now twice t

Celebrating the Ganit of Protein!

“Why is the child growing?” is the question that bothers a lot many in the administration. The answer, to be honest, is to be discovered via science, and less via what we call ‘effective administration’. Eventually, it will be the latter that will enforce the former on the field, bu

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter