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Business Insight

Fresh capital for Indian state banks highlights unaddressed issues

Fragile balance sheets show improvement but poor governance persists

India's state-run bank employees shout slogans and carry placards during a day-long nationwide strike, in Ahmedabad, India December 21, 2018.    © Reuters

India has decided to add 410 billion rupees ($5.86 billion) to its program for capital infusions into state-owned banks struggling with bad loans, but industry watchers say the country's banking system needs a governance overhaul to become capable of supplying sufficient credit to power high economic growth in addition to fixing balance sheets.

Prime Minister Narendra Modi's government is to expand the bank recapitalization program's firepower for the two years through March 2019 to 1.94 trillion rupees, according to a supplementary budget proposal submitted to parliament last Thursday.

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