October 25, 2017

The Great Indian Bank Recapitalization Program (2017 Edition)

The big bang Bank Recapitalization is here! Call it a bailout, call it recapitalization, or say that the government financial engineered a way to partially solve the bad loan problem. But what will they do?

There are three things that will happen:

  • Through budgetary allocations, the government will buy Rs.18,000 cr. worth shares of Public Sector Banks
  • And then, Public Sector Banks will need to go raise Rs. 58,000 cr. from the market
  • The government will issue a vaguely worded thing called “Bank Recapitalization Bonds” for Rs. 135,000 cr. which will be used to buy more shares in Public Sector Banks.

The time frame: 2 years.

The government will buy Rs. 153,000 cr. worth shares in banks. They will raise 58,000 cr. themselves, so there’s a 75-25 government-private infusion of new money into banks. If this is pulled off, that is.

Excellent read... more at https://capitalmind.in/2017/10/great-indian-bank-recapitalization-program-2017-edition/

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