The Union Budget 2010/11 has earmarked 165 billion rupees for recapitalisation of state-run banks to enable them to maintain minimum capital adequacy at 8 per cent in tier I capital by March 31, 2011.
"The Indian banking system has emerged unscathed from the crisis. We need to ensure that the banking system grows in size and sophistication to meet the needs of modern economy," Finance Minister Pranab Mukherjee said in his budget speech.
State-run banks were expecting a timeline for government's re-capitalisation programme to assess fund raising needs.
The World Bank has approved $2-billion loan for recapitalisation of Indian banks, but government was yet to come out with timeline to disburse the funds.
The finance minister also proposed to extend by six months the period for repayment of the loan amount by farmers from December 31, 2009 to June 30, 2010.
Mukherjee also raised interest subvention to 2 percent, from one per cent, as an incentive to those farmers who repay their short-term crop loans as per schedule.
Infrastructure Finance Co Ltd, authorised to refinance bank lending to infrastrcuture projects, is expected to more than double refinancing amount in FY11, from 30 billion in 2009/10, Mukherjee said in his budget speech.
The budget also said Reserve Bank of India is considering providing some additional banking licenses to private sector players to extend geographic coverage of banks.
The finance minister said banking licences could be given to non-banking finance companies if they meet Reserve Bank of India's eligibility criteria.
The budget also extended scheme of one per cent interest subvention on housing loans for affordable housing up to March 31, 2011.