Re-capitalization of Banks

Education News | Mar-03-2021

Re-capitalization of Banks

Most of the PSBs have huge stocks of non-performing loans on their balance sheets. As of June 2017, the NPAs of the banking industry were as high as 10.2 % of the loans advanced by the banks. This ratio increased to 12.2% by the top of September 2017. The quantity of debt hit 9.46 trillion rupees at the top of half fiscal year 2017 in September 2017. Out of this the share of public sector banks is 8.25 trillion rupees within the pile of bad loans. The banks' deteriorating balance sheets have limited their ability to lend, which has affected the bank credit growth in India. The bank credit growth within the year 2016-17 was 5.1 %, which is that the lowest since 1951. Hence, a huge recapitalization was deemed necessary to wash up the record of the banks. PSBs are capital constrained because the bad loans have hit their capital ratios thanks to provisions for NPAs and thanks to higher risk weights of bad loans. An ongoing debt problem in India has been running since 2012 when banks expanded lending at a quick pace, including to variety of problem sectors like telecommunications and mining. All this and more have added to losing the trust of folk within the public sector banks while the rich ones are usurping the Banks’ money in connivance with the administration of those banks and therefore the lower and middle-level staff has formed the scapegoat for the misdeeds of the upper ones against whom there may or might not be a symbol.

By: Jyoti Nayak

Birla School, Pilani