Beyond recapitalisation

Interest waiver will increase financial-stability risks

The Union government has sought Parliament’s approval to incur an additional expenditure of Rs 1.67 trillion in the current fiscal year. The supplementary grants will be used to fight the pandemic, increase allocations under various welfare schemes, and recapitalise public-sector banks (PSBs). The government intends to infuse Rs 20,000 crore through recapitalisation bonds into PSBs. In the given situation, when non-performing assets (NPAs) are likely to increase significantly, PSBs would require more capital. Gross NPAs in PSBs, according to the Reserve Bank of India (RBI), are expected to increase to over 15 per cent by the end of the current