Government may need $ 20 billion in coronovirus-affected state banks: report

Government may need $ 20 billion in coronovirus-affected state banks: report

Let’s Start this Interesting Article Shared on

Mumbai / New Delhi: India may need to inject 1.5 lakh crore rupees ($ 19.81 billion) into its state-owned lenders as its crispy assets are expected to double during the coronovirus epidemic, three government and banking sources told Reuters. told.
The government had initially considered a budget of around Rs 25,000 crore for bank recapitalization, but it has grown significantly, said a senior government source with direct knowledge of the matter, with loan defaults likely to increase as businesses nationwide. Take a serious hit to deal with the lockout. Coronavirus.
“The situation is very grim,” the source said.
All sources were asked not to be identified because the discussion is private. The Finance Ministry did not respond to a request for comment during working hours on Wednesday.
Another government source said capital plans were still being discussed and a final decision could be taken in the second half of the financial year. India’s financial year runs from 1 April.
More on Kovid-19

Banks were already troubled by non-performing assets worth Rs 9.35 lakh crore at the end of September 2019, or about 9.1% of their total assets at that time.
Reuters reported earlier this month that bad loans would likely increase to 18–20% of total assets in March by the end of the next fiscal year, as 20–25% of outstanding loans are assumed to be at risk of default.
According to several global rating agencies, a nationwide lockdown entering its third month is expected to contraction in economic growth in the current fiscal year, which has also changed their outlook on the banking sector to negative. Economic recovery is likely to take a long time.
A banking source said that it was unlikely that the federal government would be able to fund the entire capital injection itself and could rely on indirect measures such as issuing bonds as a means of recapitalization, a method it had previously used. Has done.
“This amount can be financed partly by monetization of fiscal deficit by the central bank,” the first government source said, adding that finance ministry officials along with the Reserve Bank of India (RBI) Talked.
RBI did not respond to a request for comment.
The government has already spent Rs 3.5 lakh crore to shore up state-owned banks in the last five years. No provision was made for further capital injection in the February budget for the 2020–21 fiscal year, with lenders encouraged to raise money instead of tapping the capital market.
Despite the decline in new loans being made due to the crisis, a senior banker said the government wanted the banking sector to maintain a lending growth of at least 6-7% to boost the economy for this financial year, but Raise money from the capital market. It was not easy in the current environment.
“A slowing economy will have an impact that banks will realize and we will need capital to sustain and grow,” he said.


Leave a Reply

Your email address will not be published. Required fields are marked *