Who wins with the banks' recapitalisation plan

October 26, 2017 12:08

RBI governor Urjit Patel has called the government's recapitalisation plan for banks as a 'monumental' move, but is it so?

Writing in The Mint, here, Aparna Iyer points out: 'Public sector lenders were sitting on a bad loan pile of Rs7 trillion as of June and this would have swelled further as of September. Barring a handful of lenders, the provision coverage ratio of most banks skims around 50% and that leaves a huge chunk of toxic loans uncovered. Stressed borrowers referred to the National Company Law Tribunal under the Insolvency and Bankruptcy Code will probably result in big haircuts for banks. Crisil Ratings estimates the cuts to be Rs2.4 trillion. This gives a fair idea as to where a part of the recapitalisation money will find its way -- towards future provisions.'

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