India plans to raise as much as Rs1.6tn ($26bn) by selling down stakes in state-backed banks, in a potentially far-reaching move that could act as a precursor to future privatisations in the country’s state-dominated banking sector.
India’s government banks are severely undercapitalised, with rating agency Fitch suggesting that lenders will need to raise $200bn in fresh capital by 2019 to meet Basel III banking norms and cope with a recent jump in problem loans.
In response, Prime Minister Narendra Modi has agreed plans to sell down stakes in 27 state-backed banks by 2019. Its holding will be cut to 52 per cent in all cases, down from between 56 per cent and 84 per cent.
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