Secondly, asking for additional provision ensures that the plan is far more mature and intricate than blind evergreening of stressed loans. “We expect the capitalisation profile of the PSBs (public sector banks) to further deteriorate, unless the government provides additional capital support,” it said. As a result of the review, bad loans of the 40 listed banks have surged to Rs.5.8 trillion. In June 2015, RBI introduced the strategic debt restructuring scheme, which gave banks the option to convert part of the debt of a company into majority equity. “Since a majority of stressed companies are struggling because of debt that is not justified by their business, it is essential to cut this debt down.

Source: Mint June 10, 2016 18:05 UTC