India Approves $2.3 Billion Capital Infusion for State-Run Banks

India approved a capital infusion of 125 billion rupees ($2.3 billion) into state-run banks to bolster their risk buffers and help them comply with tighter regulatory requirements.

The country’s central bank will complete the transfer before March, Finance Minister Palaniappan Chidambaram said at a press conference in New Delhi. Ten banks may get funds, he said.

India’s state-run banks, which account for three-fourths of the country’s banking assets, have seen capital buffers shrink as they spend more to hedge against soured debt amid the slowest economic growth in a decade. The infusion will help banks meet tighter Basel III capital rules to be phased in beginning this year.

“Unlike the usual practice of infusing money at the end of the fiscal year, this time the government is doing it early to demonstrate their commitment,” Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities Ltd. said by phone. “It is a credit positive.”

The government in March of last year said it planned to infuse 158.9 billion rupees into state-controlled lenders in the year ending-March 2013. India is among 11 of the 27 member countries of the Basel Committee of Banking Supervision that have finalized regulations to meet the Basel III requirements, the central bank said in a Dec. 28 statement.

The Bankex Index, which tracks 14 Indian banking stocks, rose 0.3 percent as of 2:30 p.m. in Mumbai, following the government’s investment plan. State Bank of India, the nation’s largest lender, rose 0.5 percent to 2,534 rupees in Mumbai.

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