Recapitalisation of Banks
Rationale/Causes
- Meet Regulatory Requirements of Capital Adequacy: The Basel Committee on Banking Supervision sets the overall framework for the regulatory system. Basel Norms I, II, and III are the three sets of Basel norms that have been released thus far.
- Credit Growth: The banks should be strong enough to lend to strong businesses and borrowers in order to foster a positive cycle of investment and employment creation.
- Dealing with NPAs: Any recapitalization will make the banks' capital base stronger. They can use it to write off bad debts.
- Economic Stimulus: It will lower loan rates, increase aggregate demand, activate idle companies, deplete ....
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