Necessary, not sufficient

Governance reforms must follow bank recapitalization

The Union government on Tuesday announced a plan to recapitalise struggling public sector banks in order to break the vicious cycle of rising non-performing assets (NPAs) that are constraining fresh lending – India’s banking credit growth is at the lowest in 25 years – which, in turn, is holding back the revival of private investment. After being in denial for long, the government is finally trying to provide the necessary support to these banks, which account for 70 per cent of Indian banking, through a Rs 2.11-lakh-crore recapitalisation plan spread over two years. So there is merit in the enthusiastic