The Pak Banker - - FRONT PAGE -

In­dia's fi­nance min­istry is seek­ing to boost the size of an an­nual cap­i­tal in­fu­sion into sta­te­owned banks to help them ward off the high­est lev­els of bad debt in 13 years. The min­istry wants to raise the cash to be in­jected in the year to March 31 to 120.1 bil­lion ru­pees ($1.87 bil­lion), a sup­ple­men­tary de­mand for grants tabled in par­lia­ment Fri­day showed. The amount, which is higher than the 79.4 bil­lion ru­pees pledged by the gov­ern­ment in its Fe­bru­ary bud­get, needs ap­proval from law­mak­ers.

The state is boost­ing its al­lo­ca­tion af­ter cen­tral-bank data showed stressed as­sets at In­dian lenders climbed to the high­est level since 2002 and cap­i­tal ra­tios de­clined.

The gov­ern­ment set aside 69.9 bil­lion ru­pees for state lenders in the fis­cal year that ended March, which was the low­est to­tal since at least 2009.

"The higher cap­i­tal in­fu­sion will help credit growth in the near term," P Karthikeyan, a Chen­nai-based bank­ing an­a­lyst at Cho­la­man­dalam Se­cu­ri­ties Ltd., said by phone. "While this meets the mar­ket's ex­pec­ta­tions for the time be­ing, the gov­ern­ment needs to put in place a long-term cap­i­tal­iza­tion plan to help lenders meet Basel III re­quire­ments."

The par­lia­men­tary doc­u­ment didn't dis­close cap­i­tal al­lo­ca­tions for any of the gov­ern­ment banks, which ac­count for about 75 per­cent of In­dia's bank­ing as­sets.

State lenders have his­tor­i­cally been un­der cap­i­tal­ized rel­a­tive to their pri­vately owned peers as rules re­quir­ing gov­ern­ment share­hold­ings of least 51 per­cent cur­tailed their abil­ity to sell shares.

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