India will infuse 145 billion rupees ($2 billion) into four state-run banks to help strengthen capital buffers and potentially free some of the lenders from regulatory curbs.
Central Bank of India, Indian Overseas Bank, Bank of India and
will receive the funds through zero-coupon bonds, according to a government notification dated Tuesday. All these lenders, except Bank of India, are under the Reserve Bank of India’s sanctions as their bad loans rose.
Prime Minister Narendra Modi’s government needs a healthier banking sector to boost lending and revive an economy set for a steep contraction. It is also looking to sell its stakes in certain lenders to earn cash and improve competitiveness. The industry’s bad-loan ratio is forecast to double in the year through September, with most of the soured assets held by state-run banks.