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India to Inject $32 Billion Into State Banks to Boost Loan Growth

  • Proposed spending is 10-fold higher than previous pledge
  • India seeks to revive bank loan growth from 25-year low
A cyclist rides past a branch of Punjab National Bank in Mumbai, India, on Saturday, Oct. 19, 2013. Volatility in India’s rupee fell to a two-month low on speculation a U.S. budget impasse that weighed on the world’s largest economy will prompt the Federal Reserve to prolong stimulus that’s buoyed emerging markets.
Photographer: Dhiraj Singh/Bloomberg

India will inject 2.11 trillion rupees ($32 billion) of capital into state-controlled lenders over two years, an amount that’s ten-fold higher than the government’s previous pledge as it seeks to revive growth in Asia’s third-largest economy.

The government will sell 1.35 trillion rupees of recapitalization bonds while banks will raise another 760 billion rupees through “budgetary support” and from the markets, Rajiv Kumar, banking secretary at India’s Finance Ministry said at a briefing on Tuesday. The government also announced plans to spend $108 billion on building highways in the next five years.