New Delhi: India`s state-owned lenders may turn to equity markets and other alternative sources of capital in order to compensate for a smaller cash injection from the government this year, a senior official said on Wednesday.
Hasmukh Adhia, financial services secretary, said he did not see an immediate rush to market. Analysts, though, have warned that an expected pick up in credit growth could put state-backed banks on the spot.
In its budget for the fiscal year to March 2016, the government said it would inject 79.4 billion rupees ($1.3 billion) in state-run banks, well below analysts` expectations, and down from 112 billion rupees initially planned for the current fiscal year.
Adhia told reporters after a meeting between government officials and the heads of the state lenders that the two sides had discussed issues including capital and the government`s injection into the sector.
"We have also asked the banks to explore other options," he said. He did not elaborate.
Though currently not under pressure for cash as an economic slowdown weighed on credit growth, India`s banks are estimated to need more than $40 billion through March 2019 to comply with global Basel III norms.
Successive governments have poured billions into the state banks, most of whom are burdened by high bad loans, bad-debt burdened state banks, although policymakers have in recent months warned that the support was unsustainable.
Jayant Sinha, the junior finance minister, said separately on Wednesday that the government discussed issues around capital-raising in the meeting with the chiefs of state-run banks, but more detailed discussions would be needed.
New Delhi`s stake in nearly two-dozen state-run banks range from 56 to 84 percent. In December, the federal cabinet allowed the lenders to mull fund-raising options by selling shares, provided the government stake in any of the banks does not fall below 52 percent.
