With this bank recap scheme being liquidity neutral, I look at it like this.
The banks will flush out the extra cash (in the form of deposits) from demonetization. Increasing equity ?? I don't know what is the benefit of that. Further, the government expects the share bazar to provide more money for the equity/bonds.
The government presently incurs an expense of 18000 crores, and a recurring expense (interest) of about 9000 crore per annum.
So, in a nutshell, the banks have less cash, the government has extra expense. OTOH, the government gets a lot of cash through the sale of bonds.
Now, how all this is going to improve the business of the banks, I don't know. Credit growth is what the banks need. If you have business, there will be enough financiers. So I think best to hold any opinion till there is more clarity on that front.
The banks will flush out the extra cash (in the form of deposits) from demonetization. Increasing equity ?? I don't know what is the benefit of that. Further, the government expects the share bazar to provide more money for the equity/bonds.
The government presently incurs an expense of 18000 crores, and a recurring expense (interest) of about 9000 crore per annum.
So, in a nutshell, the banks have less cash, the government has extra expense. OTOH, the government gets a lot of cash through the sale of bonds.
Now, how all this is going to improve the business of the banks, I don't know. Credit growth is what the banks need. If you have business, there will be enough financiers. So I think best to hold any opinion till there is more clarity on that front.
