The massive ₹3 trillion capital infusion by the government into state-run banks over the past six years has helped them reduce losses but has failed to boost credit growth, says a report.
Between FY14 and FY19, the government has infused ₹3 trillion in state-run banks, a good portion of which came in from LIC. This has doubled the value of their stake in these banks to ₹4.4 trillion as of July 2019, from ₹2.2 trillion as of March 2014.
“While the government has infused huge capital into PSBs, the same has largely been used to mitigate losses and has failed to contribute meaningfully to credit growth,” India Ratings said in a report on Thursday.
During this period FY19 and FY18, bank credit grew in double-digits (13.24% in FY19), while in FY17, the credit supply was at five decadal low of 4.6%.
