India to inject nearly $14b into banks as part of recapitalisation plan this year

New Delhi/Mumbai (Reuters): India yesterday unveiled details of a recapitalisation plan, pledging to inject nearly $ 14 billion into twenty lenders this fiscal year, in a bid to boost lending in the economy and help tackle a record bad debt problem.

The lenders, majority-owned by the government, have more than two-thirds of India’s banking assets. They also account for most of the record $ 150 billion in bad loans, which have choked credit growth after years of profligate lending.

“All public sector banks will be adequately capitalised and enabled to serve people and support inclusive growth,” said Indian Financial Services Secretary Rajiv Kumar.

The finance ministry will raise Indian Rs. 800 billion through recapitalisation bonds, and provide Indian Rs. 81.4 billion from its budget to recapitalise the banks, Kumar said.

Total recapitalisation will cross Indian Rs. 1 trillion this year, including funds raised from sales of shares to external investors, he said.

That is part of a larger two-year Indian Rs. 2.11 trillion ($ 33.1 billion) recapitalisation plan announced in October 2017. Of the total, Indian Rs. 1.35 trillion is to be raised via recapitalisation bonds, while the banks themselves will raise another Indian Rs. 580 billion from share sales.

From recapitalisation bonds and budgetary alloca tions IDBI Bank, the lender with the highest stressed-loan ratio, will get the biggest chunk of Indian Rs. 106.1 billion.

Other banks with high levels of soured debt (Bank of India and UCO Bank) will get Indian Rs. 92.32 billion and Indian Rs. 65.07 billion, respectively.

Top lender State Bank of India will get Indian Rs. 88 billion, while second-biggest state-run lender Punjab National Bank will get Indian Rs. 54.73 billion.