Capitalization of Public Sector Banks has been incorporated as one of the seven items in ‘Indra Dhanush’, dubbed as part of Banking Sector Reforms. Before addressing the issue of such capitalization it is important to understand some of the historical developments in banking globally and the way different countries responded to addressing the issue of refurbishing capital in the banks.
As part of the global financial system, Reserve Bank of India made us to believe that banks in India have to fall in line with capital adequacy norms under Basel regulations. Even prior to the embrace of capital regulations of Basel India had CRR and SLR as regulatory instruments to safeguarding the financial stability of banks. 70 percent of the Banks’ assets in India are in the public sector.