Banking Sector Support Loan

closed

Closed

This program document presents the Banking Sector Support Loan (BSSL) in a set of two programmatic development policy loans (DPL) to the Republic of India. It responds to a request from the Government to provide financial support to enable the authorities to continue implementing their economic stimulus program, which is intended to contain the effects of the global economic crisis on the Indian economy. An important part of the overall stimulus program is the provision of capital support to public sector banks (PSB). This will help maintain the confidence of the public in the banking sector, prevent shortages of capital from leading to a slowdown in credit growth, and provide a capital buffer to public sector banks to absorb the possible increase in non-performing assets (NPA) resulting from the global financial crisis and its impact on India's economy. India's Gross Domestic Product (GDP) growth slowed from a peak 9.7 percent in 2006-07 to about 5-6 percent in the third and fourth quarters of 2008-09, and is projected to remain in the 5.5-6.5 percent range in 2009-10, a sharp drop with adverse implications for employment and poverty reduction, and on investment for long-term growth. The first BSSL will address needs arising from the current economic slowdown. Continued credit expansion by the banking system will complement the comprehensive stimulus measures that the Government has put in place since mid-2008, which include monetary, trade, fiscal, and financial sector actions, and will limit the slowdown before it becomes too deep.

FY17 - Financial Sector

World Bank Group

Project

Government