Fixing stressed assets needs more than just bank recapitalisation

If the investment cycle is to be revived, a well-capitalised banking system is essential. But it should be supplemented by alternate sources of credit, such as a vibrant corporate bond market

India has been grappling with the problem of stressed assets in the banking system for a while. This has held down private investment by restraining banks from lending. Private investment has to revive, in order to create employment and pave the way for sustainable economic growth. We cannot get banks to lend as before unless their capital position is strengthened; thus, there has been a strong case for extraordinary steps to resolve it. The unprecedented bank recapitalisation programme unveiled by the government to fix this serious issue is a well thought-out move. It is well-timed, too: India’s economy has already