Non-Performing assets: A study on the impact of recapitalization on select public sector banks

The Banking sector is heart of India's vibrant economy and majority of the growth depends on how this sector helps the people in sustaining their basic income. Among these the Public Sector Banks (PSBs) account for holding 70 percent of India's deposit. Hence it is important that these banks maintain a healthy balance sheet so as to absorb sudden shocks from the market. However, recently it has been seen that the Banks have become over burdened with stressed assets and it is unable to lend any further, leading to stagnation in the Investment growth in the country. Beside this, the sluggish growth of the corporate sector has led to what is called a Twin Balance Sheet problem. Being structed in such a scenario, it is high time that the Government come up with a scheme to revive the capital structure of the banks so that the lending process can be set to flow once again. Therefore, the policy makersdecided to infuse more capital into the Banks in the form of Recapitalization. This is perhaps not the first time that the Government has come up with a such an idea but the time at which this decision is taken is very crucial and significant.

The paper aims to find out the effect of recapitalization on the Balance Sheet of the Banks and how the scheme will help the banks to get back on track. The major objectives of the paper can be summarized as follows:

Study the Present scenario of NPAs of the Banks

Study the Recapitalization Scheme

Analyze and compare the effect of Recapitalization on some selected PSBs so as to understand how it may help them to reduce the burden of growing NPAs.