'If we can fill that hole with capital, we will be ready not only to meet the existing provision numbers but also to meet the Basel requirements that will come later .'Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Recapitalization is described as a strategy to improve the financial basis of a stock to overcome a difficult financial situation or to improve its financial health. The recent issuance of recapitalization bonds by the government represents a proactive step in developing the economy. Recapitalization has been very successful in many countries and in India in the past. Bank recapitalization is a necessary step for the jurisdiction of public funds. The benefits of this exercise are difficult to quantify as they concern avoiding disruptive effects of a qualitative nature. The recapitalization has become necessary because public banking institutions are facing financial problems and need money in a context of growing bad debts. The three compelling reasons for the recapitalization of PSBS are as follows: a. The increase in the volume of impaired assets has led to the erosion of capitalb. Basel III capital rules require higher capital in banksc. The expansion of credit needs in the economy can only be met with more capital. On 24 October 2017, the government announced a major recapitalization campaign using three channels: budget, market borrowing and issuance of recapitalization bonds. The Rs. The 1.35 trillion package is largely adequate according to the Ministry of Finance's estimates. The latest data puts the increase in non-performing assets (NPAs) from financial year (FY) 2015 to June 2017 at Rs. 4.55 trillion. The increase in provisions during 2014-15 to 2017-18 is pegged at Rs. 3.79 trillion. Hence, the recapitalization of the banking sector to the tune of Rs. 2,110 billion seems sufficient to address the problem of stressed assets. Furthermore, after provisions for bad assets and on a conservative basis, even if 50% remains as residual for banks' growth capital, the multiplier impact could be significant. The latest recapitalization effort will rejuvenate the banking sector. This will help banks to extend new credit and resolve the problem of stressed assets to some extent. At the same time, it is not indiscriminate as banks themselves must commit to performance improvement measures by signing a memorandum of understanding with the government. BJP chief Amit Shah described the government's announcement of Rs 2,110 billion for bank recapitalization as "historic" and said this would not be the case. only give impetus to businesses but also provide employment to young people. Please note: this is just an example. Get a custom paper from our expert writers now. Get Custom Essay Ultimately, this recapitalization will lead to an improvement in the government's finances as it would be able to sell its stake in public sector banks at much higher valuations (market capitalization has risen to Rs 1.2 trillion in a single day). Also on the demand side, some banks that were not investing their extra liquidity in debt securities due to capital shortages may now be able to do so instead of placing them at the Reserve Bank of India's active repo..