It is quite unprecedented in its scale and ambition and the market responded with gusto: the Indian government is planning to recapitalise the country’s public sector banks with INR2.11trn ($32.3bn) over the next two years.
State Bank of India shares soared by almost 20% on release of the news. The government’s Financial Services Secretary said that the move was designed to support a rise in credit and job creation.
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Such a move has been expected but the scale of the recapitalisation will surprise many.
Analysts reacted positively and forecast that a capital injection on such a scale would address the bank’s weak capitalisation.
All of the major public sector lenders witnessed sharp rises in their share price with Punjab National Bank shares rising by 30%, Bank of Baroda up 26% and Bank of India and Union Bank of India both ahead by 24%.
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