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Banking on good faith: on efforts to recapitalise PSBs
Context
More structural reforms are needed to maximize the bank recapitalization effort
Benefit of recapitalization
This capital offers a fresh lease of life as it will help meet regulatory requirements under the Basel-III regime as well as cushion them to an extent from possible haircuts on stressed loans that are going through the insolvency resolution process
Accompanying reforms
Rating agencies have given the recapitalization the thumbs up, but remain unimpressed about governance reforms packaged with it. These include
- Tweaks to existing systems for closer monitoring of big-ticket loans
- Identifying niche areas where a bank has strengths
- Restricting corporate exposure to 25%
- A new performance management system
