finance ministry budgetary allocations

Centre to Raise Fresh Capital from the Financial Sector

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Amid the growing economic tension, the Narendra Modi led government is planning to create better investment provisions for overseas investors. In a bid to rope-in more capital from passive funds, they are allowing investors more access to both short- and long-term government securities.

In addition to being available for local investors, some categories of government bonds will be fully accessible to the non-residents as well. This was confirmed by Finance Minister Nirmala Sitharaman when she presented the annual 20-21 budget on Saturday. 

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As per reports, the Modi administration won’t inject new capital to domestic lenders. Instead, it plans on selling their stakes in two leading financial institutions for raising fresh funds. The administration will also improve the deposit insurance facilities for restoring confidence amongst consumers on the evidently faltering banking sector. 

At the budget briefing, Sitharaman announced the government’s decision to recapitalize banks if needed. This will add to the efficiency of the sector while also paving the way for its self-sufficiency. Given the long strings of mergers in 2019, this seems like a necessary move. 

The centre is currently depending on the sales of their stakes in IDBI Bank and Life Insurance Corporation for meeting their 2.1 trillion divestment goal for the new fiscal year. 

Last year, Sitharaman got centre-run LIC to take 51% of IDBI Bank’s stake when the bank was struggling with bad credit. The government since then had 47% stake, which will also be sold after they sell their stakes in LIC after April 2020.

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