India to pump $10B into banks in bid to kickstart economy

New Delhi - Finance chief also pulls plug on controversial FPI levies

India said on Friday it would pump in nearly $10 billion into government banks to ease a liquidity crunch in Asia's third-largest economy, as it goes through its worst slowdown in five years.
"We are releasing Rs700 billion [$9.7 billion] upfront into public sector banks.... This will benefit all corporate and retail borrowers," Finance Minister Nirmala Sitharaman said at a news conference in New Delhi.
She also said she would roll back an extra fee that had been introduced in the July budget on profits from equity sales that had spooked foreign investors and sent Indian shares sharply lower.
Sitharaman announced a slew of other steps to revive the misfiring economy, including an agreement by lenders to pass onto borrowers interest rate cuts by the central bank.
"People were saying that the benefit of rate reductions don't reach them at all, or reaches in trickle. There was an across the board grievance," Sitharaman said.
"This will result in reduced EMI [equated monthly installments] for housing, vehicle, retail and other loans."
Earlier this month, the Reserve Bank of India cut interest rates for the fourth time this year to a nine-year low in an attempt to boost growth, but credit has remained tight for firms and consumers.
India's economic growth has slowed in the past three consecutive quarters, losing its status as the world's fastest-growing major economy to China, with unemployment at its highest since the 1970s.
Rupee touches 72 vs dollar
Meanwhile, the Indian rupee breached the 72 mark against the dollar for the first time in nine months in opening trade due to heavy losses in stock markets.
The rupee opened lower at 71.93 and touched a low of 72.05 later. Against the UAE dirham, it was trading at 19.50 late on Friday, according to XE.com.
The Sensex closed 0.63 per cent higher at 36,701.16 points on Friday, on renewed hopes of further stimulus ahead of Sitharaman's speech.
Controversial FPI levy rolled back
Also on Friday, the surcharge levied in the union budget on short- and long-term capital gains of foreign portfolio investors (FPIS) and the one on equity in the case of domestic investors were abolished, Sitharaman announced, restoring the pre-budget position.
The surcharge on FPIs has been withdrawn to stimulate capital inflows and investment.
"In order to encourage investment in capital market, it is decided to withdraw enhance surcharge levied by the Finance No.2 Act 2019. In simple words, the enhance surcharge on FPI goes, surcharge on domestic investors in equity goes. Pre-budget position is restored," Sitharaman said at a press conference here.
The rollback comes after Indian capital markets witnessed a massive outflow of foreign funds in July. Since the budget, the Sensex had fallen over 3,000 points after it touched a lifetime high of 40,000.

• India