India mulls including bank recapitalisation bonds in mandatory reserves

The goal is to save the country's cash-strapped banks.

According to Bloomberg, a senior government official said India is considering all options including making bank recapitalization bonds eligible for inclusion in statutory limits for investment in government securities.

"Statutory liquidity ratio status allows these bonds to be traded but they may not have an extra interest advantage," Economic Affairs Secretary Subhash Garg said in an interview at his New Delhi office. "That is also being discussed and examined."

Bloomberg added that Prime Minister Narendra Modi’s administration announced a 2.1 trillion rupees ($32 billion) plan to recapitalize state-run banks on Oct. 24. To spur lending by banks grappling with bad debt in Asia’s third largest economy, the government will sell 1.35 trillion rupees of bonds while banks will get the rest through budgetary support and markets.

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