The government's proposal to recap PSBs with Rs 2.1 lakh crores over the next two years may not boost lending activity, much less accelerate growth, unless governance issues are addressed and structural reforms initiated. It may not be even sufficient to cover for non-performing assets of banks which have increased from Rs. 2.75 lakh crore in March 2015 to Rs. 7.33 lakh crore as on June 2017. Let's look at the facts. Over the last five years (2012-17), the government recapitalized the PSBs with Rs 89,000 crores. Instead of helping banks to increase their lending activity and revive growth, the PSBs used the recap funds to finance their losses on account of huge loan defaults. The overall loan growth for all PSBs put together was a paltry 2 percent in 2015-16, even as the government pumped in about Rs 20,000 crore during the year. The trend has been no different in 2016-17, with the loan growth for PSBs still at a measly 1.9 percent despite the recap infusion of Rs23,000 crores. A look into the accounts of PSBs reveals that the banks have used this money to fund their losses on account of huge loan defaults. Researchers have pointed out that core earnings of most PSBs have grossly fallen short of the requirement for bad loan provisioning. For instance, IDBI Bank's bad loans provisioning stood at Rs12,408 crore in 2016-17. But the bank managed to deliver a core net interest income (interest earned on assets less interest paid on deposits and borrowings) of only about Rs5,751 crore in 2016-17. It's the same story with most of the banks. So unless governance issues are sorted out, there is little hope of the PSBs getting out of the rut and making wise decisions in lending.