The Bank Bailout: Creating more problems than it solves

January 23, 2018

The government has recently announced an aggressive Rs. 2.11 lakh crore capital infusion plan for the NPA affected public sector banks (PSBs) over a two year period. Out of this, Rs. 1.35 lakh crore will be via the issuance of recapitalization bonds which are a restructured financial product involving no cash flow. Of the remaining Rs. 76,000 crore, Rs. 18,000 crore will come from the Budget and Rs. 58,000 crore will be raised from the market. Even though some experts have hailed this a monumental step which has become necessary in the current scenario, a closer look reveals that unless accompanied by fundamental reform in the banking sector, such a move is tantamount to only sweeping a nagging socioeconomic issue under the carpet.

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