Bad Loans, NPAs and the IBC
Recapitalisation and Bank Mergers
The government injected about ₹3 lakh crore into public sector banks and merged several to make them stronger.
Rebuilding the banks.
Capital injections
Around ₹2.1 lakh crore was announced in 2017 and more later.
PCA
Weak banks were put under Prompt Corrective Action, limiting new lending.
Mergers
In 2019-20, ten public sector banks were merged into four.
Result
The number of public sector banks fell from 27 in 2017 to 12.
A merged bank
Two smaller banks combine to form a larger one with a bigger capital base.
Assuming mergers automatically fix bad loans
They also need governance reform.
Key takeaways
- Banks were recapitalised.
- PCA restricted weak banks.
- Ten banks became four.
- Public sector banks fell to 12.
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