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Indian government banks to get $3.1 billion boost

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Staff writer ▼ | August 18, 2015
The Indian government unveiled what an official called the broadest changes to the nation's state-run banks since the 1970s in a bid to jump start economic growth.
Indian government
India   One of the most sweeping changes in India
State Bank of India and Bank of India will be among 13 state-owned lenders to receive Rs200bn (3.1 billion) in capital next month as the government bolsters their risk buffers amid rising bad loans. Policymakers also proposed transferring the government's stakes in the banks to a holding company and introducing performance-linked incentives for executives.

"This is one of the most sweeping changes in India's banking system after the nationalisation of banks in 1969-70," Junior Finance Minister Jayant Sinha told reporters in New Delhi.

"We will follow a bottoms-up transformation process to be led by banks and their boards. Each bank would be monitored based on key performance indicators."

The move is part of Prime Minister Narendra Modi's effort to bolster loan growth while helping banks meet higher capital-reserve requirements. That's a task complicated by a slower-than-expected economic revival and the highest interest rates among major Asian economies hurt borrowers.

Modi has earmarked Rs250bn for bank recapitalisation in the year through March 2016, more than triple the amount in the previous fiscal year.