Lockdown Aftermath: Govt may need to pump Rs 1.5 trn into state banks
Published On: Thursday, May 28, 2020 | By: Team KnowMyStock
India may need to inject up to Rs 1.5 trillion ($19.81 billion) into its state-owned lenders as their pile of soured assets is expected to double during the coronavirus pandemic, three government and banking sources told Reuters. The government initially considered a budget of around Rs 250 billion for bank recapitalisations but that has risen significantly with loan defaults likely to rise as businesses take a severe hit from nationwide lockdowns to tackle the coronavirus. "The situation is very grim," sources said, adding that banks would require fresh funds soon. Indian banks were already saddled with Rs 9.35 trillion of non-performing assets at the end of September 2019 or roughly 9.1% of their total assets at the time. One source said it was unlikely the central government would be able to fund the entire capital injection itself and may rely on indirect measures such as issuing bonds as a means of recapitalisation, a method which it has used previously.
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