The Indian government only allocated 100 billion rupees in additional capital for state-owned banks for fiscal 2017-2018, a move that could force some lenders to tap the equities market and sell noncore assets, The Economic Times reported Feb. 1.
Finance Minister Arun Jaitley said during his presentation of the Union Budget that only 100 billion rupees have been allocated as additional capital for state banks for fiscal 2017-2018.
State banks need additional capital from the government after struggling with massive amounts of bad loans. Moody's said the government will have to infuse 1.2 trillion rupees for its 11 rated public banks by 2020 in order for banks to overcome losses stemming from higher provisions for bad loans. The government had planned to infuse 700 billion rupees over a period of four years.
State banks cumulatively posted losses of 180 billion rupees in the last fiscal year on account of higher provisions. Banks will have to tap the equities market to meet capital needs or sell noncore assets such as shares in insurance companies.
As of Jan. 31, US$1 was equivalent to 67.48 Indian rupees.