India agrees to cut stakes in state banks; could raise $26 bln

The cabinet approved plans to raise about 1.6 trillion rupees ($25.76 billion) by selling some of its stakes in state-run banks by 2019, a government statement said on Wednesday.

The government holds stakes ranging from 56 percent to 84 percent in 27 state-run banks. They account for 70 percent of total outstanding loans of about $1 trillion in Asia’s third-largest economy.

The state-run lenders are estimated to need as much as $60 billion in capital over the next four years to meet new global regulations and to build a buffer against rising bad loans.

“While permitting banks to raise capital from the market, the banks would be advised to preserve the Government holding at minimum 52 percent,” the statement said, adding the banks could phase in sales of shares in the market.

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