14/08/2015 8:12 PM IST | Updated 15/07/2016 8:25 AM IST

Indian Govt Expects Public Sector Banks To Be Able To Raise Rs 800 Billion: Hasmukh Adhia

Hindustan Times via Getty Images
NEW DELHI, INDIA - JANUARY 20: Union Finance Minister Arun Jaitley and Financial Services Secretary Hasmukh Adhia during press conference at Shastri Bhawan on January 20, 2015 in New Delhi, India. As many as 11.5 crore bank accounts have been opened under the Pradhan Mantri Jan Dhan Yojana, exceeding the enhanced target of 10 crore and covering 99.74 per cent of households. A Guinness Book World record has been created for most bank accounts opened in one week as part of the Financial Inclusion Campaign is 18,096,130 and was achieved by the Department of Financial Services, Government of India from August 23 to 29, 2014. (Photo by Virendra Singh Gosain/Hindustan Times via Getty Images)

The Indian government expects public sector banks would be able to raise 800 billion rupees ($12.31 billion) from the markets to strengthen their balance sheets, Financial Services Secretary Hasmukh Adhia said on Friday.

Adhia also announced the appointment of new heads of five banks, including two from the private sector, as part of fresh measures to improve the performance of the state banks, which are struggling with rising bad loans.

India needs to minimise political interference in public sector banks, Finance Minister Arun Jaitley said on Friday, as the government announced measures to improve the performance of state-run banks that are struggling with rising bad loans.

India's banking sector, dominated by more than two-dozen state-run lenders, has been hobbled by its highest bad-loan ratio in a decade as slower economic expansion hurt companies' ability to service debt.

While the pace of additions to bad loans has started slowing for most banks, higher provisioning is hurting their profits. State-run lenders also account for a majority of the sector's bad loans.

Indian banks may need up to 1 trillion rupees to manage the risks from their exposure to debt-stressed firms, Fitch's Indian unit said this month, on top of the tens of billions of dollars in capital they need to comply with global banking rules.

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