Government clears Rs 2.11 trillion bank recapitalisation plan

The central government has unveiled a plan for support of Rs 2.11 trillion for public sector banks in order to spur genuine infrastructure lending for upcoming mega projects. Bad loans and stressed assets in the banking system are currently estimated at Rs 10 trillion ($153.49 billion). The support, to be extended over a two-year period, is aimed at cleaning up the legacy of non-performing assets (NPAs). The government will pump in Rs 1.35 trillion through bonds, also known as recapitalisation bonds. Another Rs 760 billion will come from budgetary support and banks tapping the market. While Rs 180 billion will come from the government’s recapitalisation plan under Indradhanush, banks will raise the remaining Rs 580 billion from the market by diluting government equity.