The government sought parliamentary approval to inject Rs 20,000 crore ($2.72 billion) in state-run banks in the current fiscal year, to help lenders mitigate the expected surge in bad loans due to the pandemic. In April, news agency Reuters reported that New Delhi had assured state banks that it is ready to provide capital support as the coronavirus pandemic may lead to a surge in bad loans as economic growth slows.
The pandemic’s impact is likely to push up the ratio of gross non-performing assets in the country’s banking system to at least 12.5 per cent by March 2021, from 8.5 per cent in March 2020, according to a report by the Reserve Bank of India.
The government has already pumped in Rs 3.5 lakh crore in the last five years to rescue its banks.
In February’s budget, it had not allocated any funds to support the sector and instead encouraged them to turn to the country’s capital markets.
The government sought parliament approval for a total additional spending of Rs 1.67 lakh crore ($22.8 billion) for the current fiscal year.
The government would use the Rs 46,602 crore to transfer to states whose are finding it difficult to raise taxes and Rs 10,000 crore to subsidize food.
($1 = Rs 73.3600)