Without adding to fiscal burden we have created a solution where banks will have capital to write off NPAs, government fiscal stance continues to remain valid and banks now have ability to create credit. Now by providing capital, banks will have the ability to write off NPAs. The way this entire recap bond has been structured as per the global definition it becomes part of fiscal deficit of this year. For a while, in India, there was no capital for banks and liquidity was tight so they were not lending. If your credit growth would have been 20% YoY then economic growth could not be 5.7%.When your credit growth is 7.5% then even 5.7% growth is a miracle.

Source: Economic Times October 26, 2017 02:43 UTC