India’s finance minister Palaniappan Chidambaram revealed that the country’s public sector lenders are to receive a capital injection of INR112bn ($1.8bn).
Speaking in the Indian parliament, Chidambaram presented the move as part of the government’s interim budget for the year 2014-2015.
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He said: "In 2014-15, I propose to provide INR112bn for capital infusion in public sector banks.
"They have opened 5,207 branches so far, against the target of 8,023 branches, and are near the goal of installing an ATM at every branch."
The capital injection is intended to relieve pressure on state-run retail banks, which have a high proportion of non-performing assets.
Chidambaram added: "Banks are under strain owing to rising non-performing assets.
"Bankers have assured me that as the economy turns they will be able to contain the NPAs, recover more loans, and build healthier balance sheets."
The news will come as a relief to banks across the retail sector, some of which were already anticipating something of the kind from the government.
On 14 February, Indian newspaper the Financial Express reported that the United Bank of India had decided to resume lending operations after suspending loans in December.
The decision to resume lending was linked in some quarters to reports that the government was preparing to give state-backed lenders a capital injection.
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