Any strategy to deal with the worsening banking crisis involves the three stages of recognition, resolution and recapitalization. Reserve Bank of India governor Urjit Patel did well last week to highlight the need to bolster the capital of the Indian banking system. Extra capital will be needed when banks take large haircuts to bring the book value of the problem loans closer to the economic value. So will the government create fiscal space to make a massive bank recapitalization possible? Second, will money be given to public sector banks depending on their immediate capital needs or on the quality of governance?

Source: Mint August 20, 2017 18:11 UTC