- Banks face higher capital requirements as per Basel III banking rules
- Under the current plan, banks are supposed to subscribe to bonds
- Centre will invest funds raised from bonds in return for equity in banks
Here are five things you must know about the bank recapitalisation plan of Rs 80,000 crore that was cleared by the lower house of Parliament:
1. The lenders, which are majority-owned by the government, have more than two-thirds of the country's banking assets. These banks also account for the bulk of the sector's record $150 billion in bad loans, a major factor choking new credits, after years of profligate lending.
2. The banks also face higher capital requirements as mandated by the global Basel III banking rules to be fully implemented by March 2019.
4. Under the current plan, banks are supposed to subscribe to the bonds and the government will invest the funds raised in return for equity in the banks.
5. Earlier on Thursday, Moody's Investors Service said that it expected all the 21 state banks to meet the minimum Basel III requirement of 8 per cent common equity tier 1 (CET1) ratio by March 2019, aided by the recapitalisation. (With Reuters Inputs)
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