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.
