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INR70,000 crore budget bonanza for banks may not trigger credit growth. Lenders need to conserve capital.

Sustainable double-digit credit growth may require periodic recapitalisation of public-sector banks, which might not be forthcoming given the fiscal constraints. In this context, capital conservation by lenders becomes crucial by minimising credit and operational risks — from weeding out frauds to selling unrelated businesses.
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8 Jul 2019 8 Mins Read 0 comment
Finance minister Nirmala Sitharaman (centre) with minister of state for finance Anurag Thakur (on her right) leave for parliament to present the Union Budget 2019-20 in New Delhi on July 5, 2019. Getty Images
Finance minister Nirmala Sitharaman (centre) with minister of state for finance Anurag Thakur (on her right) leave for parliament to present the Union Budget 2019-20 in New Delhi on July 5, 2019.
In March 2009, then US treasury secretary Timothy Geithner, when asked what regulators should do to avoid a repeat of the financial crisis at a hearing of the US House Financial Services Committee, put it succinctly: “The most simple way to frame it is capital. Capital sets the amount of risk you can take overall. Capital assures you have big
It needs to be borne in mind that unbridled infrastructure exposure during the last decade has, in fact, contributed in no small measure to the present ills of the banking system. To avoid such mistakes, simultaneous policy interventions like framing a robust land-acquisition act and development of bond markets is an absolute necessity. ( Graphics by Sadhana Saxena)
In March 2009, then US treasury secretary Timothy Geithner, when asked what regulators should do to avoid a repeat of the financial crisis at a hearing of the US House Financial Services Committee, put it succinctly: “The most simple way to frame it is capital. Capital sets the amount of risk you can take overall. Capital assures you have big It needs to be borne in mind that unbridled infrastructure exposure during the last decade has, in fact, contributed in no small measure to the present ills of the banking system. To avoid such mistakes, simultaneous policy interventions like framing a robust land-acquisition act and development of bond markets is an absolute necessity. ( Graphics by Sadhana Saxena)

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