The BIC's time to resolve recap issues is now

Inadequately capitalised banks will face problems in increasing their credit portfolios. A credit squeeze on account of banks' balance-sheet constraints would also have larger macroeconomic dimensions

Banks are among the most leveraged entities. The Basel Committee norms permit a leverage of 33 times. Ironically, this ability to leverage comes from the strength provided by the capital of a bank. No doubt, in times of stress, any entity will find it difficult to raise equity; in the case of banks, however, it is even more difficult, given the need for the larger investors to meet the fit and proper criteria. It is for these reasons that the Reserve Bank of India (RBI) has been insisting on and off on the need for banks to raise capital well