India’s finance minister Palaniappan Chidambaram revealed that the country’s public sector lenders are to receive a capital injection of INR112bn ($1.8bn).
Speaking in the Indian parliament, Chidambaram presented the move as part of the government’s interim budget for the year 2014-2015.
Go deeper with GlobalData
He said: "In 2014-15, I propose to provide INR112bn for capital infusion in public sector banks.
"They have opened 5,207 branches so far, against the target of 8,023 branches, and are near the goal of installing an ATM at every branch."
The capital injection is intended to relieve pressure on state-run retail banks, which have a high proportion of non-performing assets.
Chidambaram added: "Banks are under strain owing to rising non-performing assets.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData"Bankers have assured me that as the economy turns they will be able to contain the NPAs, recover more loans, and build healthier balance sheets."
The news will come as a relief to banks across the retail sector, some of which were already anticipating something of the kind from the government.
On 14 February, Indian newspaper the Financial Express reported that the United Bank of India had decided to resume lending operations after suspending loans in December.
The decision to resume lending was linked in some quarters to reports that the government was preparing to give state-backed lenders a capital injection.
Related articles:
United Bank of India to resume retail lending, says local media
Indian banks plan to open 10,000 branches in 2014, says Union Finance Minister
Indian public sector bank staff go on nationwide strike
