This refers to the Editorial, “Now for the reform” (October 26). Indeed it was absolutely necessary to recapitalise ailing PSU banks since couple of State-owned banks are almost on the brink of minimum capital requirement as stipulated by the RBI due to continuous profit erosion thanks to growing NPAs. It was about time fresh capital was infused into them. What is really positive is that such huge recapitalisation will not impact fiscal deficit due to the fact that fund raising will be through offline recapitalisation bonds.
It is also heartening that Finance Minister himself said that PSU bank consolidation and other banking reforms will follow soon and he also accepted that these banks first lent indiscriminately and then did not reveal the true picture and after that stopped lending all together. So all in all it looks like a good, positive step which will strengthen the banking system if backed up with consolidation and reforms. This additional capital will help in both addressing norms and credit growth. Hopefully, this move will help reviving lending to MSMEs as they contributes not only to a significant portion of our GDP but are also job creators. It is good that the Government has already identified some 50 clusters for reviving lending to MSMEs.