India’s government sought parliamentary approval to inject Rs 200 billion ($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, 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 Indian banking system to at least 12.5% by March 2021, from 8.5% in March 2020, according to a report by the Reserve Bank of India.
The government has already pumped in Rs 3.5 trillion 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 India’s capital markets.
The government sought parliament approval for a total additional spending of Rs 1.67 trillion ($22.8 billion) for the current fiscal year.
The government would use the Rs 466.02 billion to transfer to states whose are finding it difficult to raise taxes and 100 billion rupees to subsidize food.