Any pick-up is likely only after banks’ balance sheets have been materially strengthened, which would include cleaning up some $191 billion of stressed assets. This includes Rs1.35 trillion through recapitalisation bonds and Rs76,000 crore via “budgetary support” and from the market, the government announced late Tuesday. Here’s how it may roll out:Impact on fiscal deficitThe government’s plan will have little impact on its target to shrink the shortfall to 3.2% of GDP in the year through March 2018 because the IMF’s rules classify such debt as “below-the-line” financing. Any pick-up is likely only after banks’ balance sheets have been materially strengthened, which would include cleaning up some $191 billion of stressed assets. The government’s plan will front-load capital injections while staggering the attendant fiscal implications over a period of time, Reserve Bank of India governor Urjit Patel said in a statement.

Source: Mint October 25, 2017 09:45 UTC