Reality of recapitalisation
Bailout of PSBs often comes without due commitment from banks.
Periodic bailing out of the public sector banks (PSBs), the commanding height of the country's financial system, in the post-reform phase has become passé. But what strikes dispassionate observers is the fulsome praise and hosanna that hails such a course of action. For, the management folly has a cost which is socialised even as the means to this end are cloaked in subterfuges and technicalities. To boot, no less a person than the country's banking industry regulator, the RBI Governor, characterised it as 'cash neutral'. It is an open secret that most PSBs require infusion of capital not only to meet the regulatory minimum capital requirements that are called in technical parlance, capital adequacy norms, but also for cleaning up the Augean stables of their balance sheets bruised by the non-performing assets (NPAs) that are a byproduct of their imprudent lending to risky ventures or friendly corporate honchos of dubious hues with obvious political links!