India to recapitalise banks to address non-performing assets

October 25, 2017

NEW DELHI - The Government of India has announced a bank recapitalisation plan overnight. The plan envisages a combination of issuance of bank recapitalisation bonds, increase in budgetary allocations and equity issuance.

ANZ Bank says full details of the mode of bond issuance will become clear over the next few days. “It is, however, clear that these bonds will be off-budget”, with only the interest payment becoming an explicit budgetary cost.

ANZ says that, overall, it views the announcement as positive because high levels of non-performing assets (NPAs) and inadequate bank capital have severely constrained India’s growth.

“Over a period of time, recapitalisation will improve the loanable capacity of banks as well as the transmission of monetary policy,” ANZ says. www.live.anz.com (ATI).