The recapitalisation package recently announced by the government is the most significant measure yet to tidy up India’s beleaguered banking system and should all but enable India’s banks to meet global capital requirements over the coming years. Further ahead, the authorities need to ensure that the problems affecting the banking sector, most notably the huge burden of bad debt, don’t re-emerge. Privatisation would bring significant benefits. This may prove a step too far, but other measures to at least reduce the influence of the public sector in the banking system are feasible.
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