The government on Tuesday said it would step in to support the struggling public sector banks through multiple methods, with funds totalling up to Rs 2.11 lakh crore over the next two years. Announcing a range of measures to lift the slowing economy, the Finance Ministry laid out plans to support small and medium enterprises, boost credit growth and fight the bad loans crisis.
Of the Rs 2.11 lakh crore, the Centre aims to provide Rs 18,139 crore directly through its budget, Rs 1.35 lakh crore through selling bonds, and the rest by selling government stake in the market. This would support credit growth and job creation, the Finance Ministry said.
Indian state-owned banks have been grappling with stressed assets for the past few years. This has affected their profits as they have often had to write off defaulted loans.
The government also said it would take other “definite steps” to help public sector banks play a major role in the financial system.
“The unprecedented recapitalisation and the initiatives announced today are expected to have a noticeable impact in the near term, contributing to accelerated economic activity, employment and growth of the economy,” a government release said.