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India plans to give $11bn lifeline to ailing state banks

India plans to give $11bn lifeline to ailing state banks

NEW DELHI: Planning to inject $11 billion of capital into debt-laden state banks over the next four years, India’s Finance Minister Arun Jaitley on Friday sought parliament’s approval to boost budget spending by $4bn in the current fiscal year.

High levels of non-performing assets in state-run banks have made it hard for the government of Prime Minister Narendra Modi to revive investment or accelerate growth in Asia’s third largest economy.

After initial hesitation, Jaitley agreed with a plea by the Reserve Bank of India to provide more capital to banks.




Jaitley plans to provide 250bn rupees ($3.90bn) each in the current and next fiscal year, while 200bn rupees would be provided during 2017-18 and 2018-19, the finance ministry said in a statement.

Having allocated $1.24bn for the state banks in its February budget, the finance ministry aims to inject an extra $1.9bn, if parliament approves. Later, it will seek an additional $50bn rupees for capital infusion into banks.

The country’s top six banks — State Bank of India (SBI), Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank and IDBI will get $1.6bn, the ministry said.

That represents 40 per cent of the total $4bn that the government plans to spend this fiscal year, it added.

All banks will get financial support from the government, 20pc of the fund allocation will be tied to performance.

Published in Dawn, August 1st, 2015

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