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.

 

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

Android App for RAS Prelims and Mains 

-Rajasthan GK (History, Geography, Economy and Polity)
-RAS Prelims Notes
-RAS Current Affairs
-Daily Mains Practice Questions (DMPQ)
-Daily Prelims Practice Questions (DPPQ)
-Mains Topic wise Notes for All RAS GS Papers

Install Now on

Subscribe to RAS Free Notes

Never Miss any RAS important update!

Join 9,431 other subscribers