DMPQ- What are recapitalisation bonds? How recapitalisation bond woks?

A government bond is an instrument to raise money from the market with a promise to repay the face  value at the maturity  date and a periodic interest. A bond issued for the purpose of recapitalisation is called recapitalisation bond.

 

Working of Recapitalisation bond:

The government will issue recapitalisation bond, which banks will subscribe and enter it as an investment in their books. The bank will lend money to the government for subscribing the bonds.

The money raised by the government through these bonds will go back to bank as capital. This will immediately strengthen the balance sheet of the banks and show capital adequacy. Since the bonds are backed by government, the credit rating is high and risk associated is  0% and hence chances of it becoming a bad loan is null. Near about 1.4 lakh crore is to be obtained and infused via recapitalisation bonds.

 

OPSC  Notes brings Prelims and Mains programs for OPSC  Prelims and OPSC  Mains Exam preparation. Various Programs initiated by OPSC  Notes are as follows:- For any doubt, Just leave us a Chat or Fill us a querry––

Leave a Comment

[jetpack_subscription_form title=”Subscribe to OPSC Notes” subscribe_text=”Never Miss any OPSC important update!” subscribe_button=”Sign Me Up” show_subscribers_total=”1″]