india

Updated: Sep 03, 2019 16:11 IST

Four day after Union finance minister Nirmala Sitharaman announced mega mergers of ten state-run banks into four financial behemoths, the government on Tuesday said it would infuse Rs 4557 crore and Life Insurance Corporation would pump in Rs 4700 crore for recapitalisation of IDBI bank

“Cabinet has cleared recapitalization of IDBI Bank with one-time infusion of funds by both government and LIC (Life Insurance Corporation). It will help both IDBI and LIC, and shows government’s commitment to take banking to a sound level,” Union environment minister Prakash Javadekar said.

Tuesday’s decision on the infusion of funds into IDBI comes on the heels of the country’s GDP growth falling to its lowest figure of 5 per cent in six years. Around the time Javadekar made the announcement of funds infusion into IDBI, domestic equity benchmark BSE Sensex plunged 800 points in the afternoon session on the back of heavy selling of banking, energy and auto stocks.

Last year, the LIC board had decided on the modalities of increasing stake in debt-ridden IDBI Bank to 51 per cent.

The government’s announcement of bank mergers last week’s was also aimed to unleash greater efficiencies and latent strength in India’s banking sector to turn the country into a $5 trillion economy.

Ahead of Sitharaman announcing the bank mergers, the Reserve Bank of India had said it would transfer Rs 1.76 lakh crore to the government in the current financial year, in line with the recommendations of the committee under former central bank governor Bimal Jalan.

“The recapitalisation will help IDBI to come on the frontfoot and take banking to the next level, “ Javadekar said.

To a question on former Prime Minister Manmohan Singh’s criticism of the government over “alleged” mismanagement, Javadekar said from being 11th largest economy the country had move to being the fifth largest economy. “We are on our way to becoming the third largest,” he said.