Bank recap steals focus from Q2 results

PSUs will now find it easier to offer credit and that might give some stimulus even if a large proportion of new loans eventually goes sour

The mega-recapitalisation of public sector banks drove the market to new highs. PSU banks saw unreal spurts in share prices. Single-session gains exceeded 25 per cent for the ones listed in the futures and options sector. When it comes to details, however, the story is hard to judge from a valuation perspective.

The government will issue recapitalisation bonds of Rs 1.35 trillion, which the banks will buy. The government will reinvest that money in PSU bank equity. This is in addition to Rs 18,000 crore that it had earlier committed as bank equity investments. Plus, the banks will sell another