The Government may have used all tactics to browbeat RBI. Infact RBI could only be reacting to the extreme pressure from government for all that we know. It appears that the government needs money to distribute to win the elections because of extremely serious charges brought by the opposition against them. Imagine when some of the banks are so weak government is asking to reduce the capital these banks should keep. Who will pay back the depositors money if these banks collapse. The government is not able to inject the full capital required by these banks as it strains their budget. If the capital injection strains the budget, then how it expects to bail out the depositors which will require tens of lakhs of crores of rupees. It is better that the government does not allow the banks that have destroyed the money so far to become monsters. Sufficient capital is what will keep in check runaway growth and ultimate collapse of these banks and misery to the depositors.
