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INR 2.11 trillion state banks recapitalisation plan approved by government

INR 2.11 trillion state banks recapitalisation plan approved by government

Economy

GlobalLinker Staff

GlobalLinker Staff

25 Oct 2017, 14:24 — 2 min read

A plan to recapitalise the state banks to the tune of INR 2.11 trillion ($44.2 billion) over the next two years has been approved by the government. The goal is to clean banks’ books and revive investment in an economy where growth has slowed down considerably.

1.35 trillion INR will come from recapitilisation of bonds, INR 760 billion will come from budgetary and equity assistance according to Rajiv Kumar who is India’s financial services secretary.

Finance Minister Arun Jaitley said that the process of recapitalisation would be followed by a slew of reforms. Details were not given at the time. Speaking about India’s high growth in the recent past he said, "And our intention is that the high growth economy that India has become, we continue to maintain that position."

Macroeconomically, banks are the main source of funds for India’s companies. However, a recent history of bad debt has impacted bank profits and led to a significant reduction of lending - especially to SMEs. The economy itself is stalling so is in dire need of funds beings available.

In India, 21 state-run banks account for 67% of all banking assets but also account for most of the INR 9.5 trillion of bad loans.

The IMF believes India’s slowdown has bottomed out and 8% growth will be achieved again soon. Watch this video by PIB to see the announcement:


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