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It’s been late coming, but the recapitalisation of public sector banks is a winner.
Q. Discuss the way to recapitalize the banking system and what are challenges banking system facing in India.
Recapitalisation involves a major change in the way a bank is funded. This could come about through issuing new shares or loan from a government. Essentially recapitalisation involves providing the bank with new capital, e.g. government agree to buy new shares. This improves the banks’ bank balance and prevents them from going bust.
Difference between Loans and recapitisation
If you give a bank a loan, it can help improve liquidity, but it doesn’t improve their balance sheet, because they still owe the extra money received. i.e. the money shows up as an asset, but also as liability because you have to pay it back.
Recapitalisation would inject money without creating a liability.
2. Left behind on the path ahead
The tragic death of an 11-year old girl in Jharkhand — which has resulted in the government going into defensive mode — reflects the dire situation that poor families in India find themselves in every day.
Globalization is getting very bad press in industrialized countries. From being touted aggressively only 10 years ago as a “win-win” development for all, it is now blamed for these economies’ ills.
Q. The anti-globalization backlash in the West must not be allowed to swamp the recognition that globalization has been good for developing countries. Critically Examine.
US is reconsidering India’s role in Indian Ocean region. A rejig of US policy in South Asia is in order too.
Q. Analyse India-USA relationship in the context of Af-pak region.
Q. Bank recapitalisation plan is a necessary but not sufficient condition for reviving growth. It must be accompanied by structural changes. Comment.
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