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

Celebrating the spirit woman with UN designated 14th Edition of the International Women’s Day Awards

Public Diplomacy Forum, in association with Tatsat Foundation, Business World and Governance Now is hosting "International Women`s Day Awards" for the true celebration of "STREE SHAKTI." This is a much-anticipated calendar event in New Delhi in its 14th edition which is a celebration of

BFSI Needs Military-grade Cybersecurity Solutions to Detect the Most Advanced Attacks: Deloitte

In such unprecedented times, businesses are facing different kinds of risk, which has

“New guidelines suppress digital, social media, and OTT platforms”

The government’s recent notification to regulate digital media is an attempt to suppress all social media platforms including digital news platforms, Dr. Shama Mohamed, Congress Spokesperson, has said. Only digital news platforms are able to say what they want to say, so the government

Covaxin Phase 3 clinical trial shows 81% efficacy

India’s first indigenously produced Covid-19 vaccine, Covaxin, has shown an interim efficacy of 81% in Phase III trials for preventing the virus. Covaxin has been developed in India jointly by the Indian Council of Medical Research (ICMR) along with Bharat Biotech International Limited (BBIL). &

In Mumbai, 29 private hospitals join vaccination drive

In order to expand the vaccination drive, the centre has allowed 29 private hospitals in Mumbai not empanelled in central and state health schemes to be designated as Covid Vaccination Centres (CVC). After a virtual meeting with the chief minister and the BMC commissioner Tuesday evening, th

Spectrum auction concludes; response better than expected

India on Tuesday concluded the spectrum auction after a total of six rounds of bidding. The authorities described the response as better than expected, with total bids valued at Rs 77,814.80 crore. The quality of service and customer experience is expected to improve with deployment of additional spectrum

Visionary Talk Series with Dr. Shama Mohamed On the present state of Governance



Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter