Mumbai: The general Budget has earmarked Rs16,500 crore for recapitalisation of state-run banks to enable them to maintain minimum capital adequacy at 8% in tier I capital by 31 March 2011.
“The Indian banking system has emerged unscathed from the crisis. We need to ensure that the banking system grows in size and sophistication to meet the needs of modern economy,” Union finance minister Pranab Mukherjee said in his Budget speech.
State-run banks were expecting a timeline for government’s re-capitalisation programme to assess fund raising needs.
The World Bank has approved $2-billion loan for recapitalisation of Indian banks, but government was yet to come out with timeline to disburse the funds.
The finance minister also proposed to extend by six months the period for repayment of the loan amount by farmers from 31 December 2009 to 30 June 2010.
Mukherjee also raised interest subvention to 2%, from 1%, as an incentive to those farmers who repay their short-term crop loans as per schedule.
Infrastructure Finance Co Ltd, authorised to refinance bank lending to infrastrcuture projects, is expected to more than double refinancing amount in FY11, from 3000 crore in 2009-10, Mukherjee said in his Budget speech.
The Budget also said Reserve Bank of India is considering providing some additional banking licenses to private sector players to extend geographic coverage of banks.
The finance minister said banking licences could be given to non-banking finance companies if they meet Reserve Bank of India’s eligibility criteria.
The Budget also extended scheme of 1% interest subvention on housing loans for affordable housing up to 31 March 2011.