the plan

the plan

the challenged banks buy goi bonds which are recycled into bank equity. nothing else changes

150 billion usd system npa. 100 billion usd psu banknpa

With economic revival being big on the agenda, the government on Tuesday unveiled a Rs 2.11-lakh crore support for public sector banks (PSBs), struggling with mounting bad loans, in order to spur “genuine” infrastructure lending for upcoming mega projects.

The move is aimed at creating jobs and boosting economic growth, which slumped to a three-year low of 5.7 per cent in the first quarter of the current financial year.

Facing a resource crunch and the target to rein in its fiscal deficit at 3.2 per cent of gross domestic product in FY18, the government will pump in Rs 1.35 lakh crore of this recapitalisation through bonds. Whether this would have a bearing on the fiscal deficit or not will depend on the contours of the bond, which are still to be decided.

The government will soon come out with “recapitalisation bonds” to support public sector banks, which account for 70 per cent of non-performing assets (NPAs) in the banking system at Rs 7.33 lakh crore.