India’s battle-scarred bankers are hoarding cash and reluctant to lend to smaller firms, forcing the government to ride to the rescue of millions of companies struggling for survival during the nationwide lockdown, Bloomberg News reported. The lenders are accepting penalty rates to keep a record $92 billion a day with the Reserve Bank of India and have shunned a central bank program aimed at credit-starved corporates, choosing safety as the pandemic cripples economic activity. The government responded on Wednesday by offering $62 billion in credit lines and cash injections to the

A rally in Indian shares lost steam on Tuesday as banking stocks slid after a report warned of stress among lenders, at a time when millions of borrowers face losses in income amid a coronavirus lockdown, Reuters reported. The NSE Nifty 50 index, up more than 1.5% on Tuesday morning, closed 0.95% lower at 9,205.60. The S&P BSE Sensex fell 0.83% to 31,453.51. The easing of coronavirus lockdowns helped boost Indian markets, but the optimism began to fade as banking stocks cratered. The top four drags to the Nifty 50 were lenders.

India is considering a proposal to guarantee as much as 3 trillion rupees ($39 billion) of loans to small businesses as part of a plan to restart Asia’s third-largest economy, which is reeling under the impact of a 40-day lockdown, people with knowledge of the matter said, Bloomberg News reported. Under the proposal, small firms will be eligible to borrow an additional 20% of their credit limit, the people said, asking not to be identified as the discussions are private. The extra debt will be fully backed by Prime Minister Narendra Modi’s administration, the people said.

Kotak Mahindra Bank Ltd. plans to raise about $1 billion with a new share issue in a move that will strengthen its capital buffers and reduce the stake held by its wealthy founder, Bloomberg News reported. The Mumbai-based lender didn’t provide pricing details on the 65 million of new shares it said it will issue in a filing on Wednesday. However, under a regulatory formula, they should be priced around the level of the latest two-week average, which works out at about 1,184 rupees ($15).

In the second week of April, deep into India’s initial 21-day lockdown to curtail the spread of the coronavirus, senior officials at Bajaj Finance Ltd. held a conference call, Bloomberg News reported. The prognosis wasn’t good. In just 10 days the keystone shadow lender had lost 350,000 customers and almost 50 billion rupees ($651 million) in assets under management. Small and medium enterprises were under strain and it was considering setting aside money for losses in case large borrowers went under.

India’s banks are freezing credit lines to shadow lenders as the coronavirus crisis shuts down commerce in Asia’s third-largest economy, but leaving this sector in the lurch risks wider financial contagion, Reuters reported. All major state-owned and private banks have stopped lending to non-banking financial companies (NBFCs) due to concerns about their financial health as businesses they lend to reel from the impact of the pandemic, four industry executives, who asked not to be named due to the sensitivity of the situation, told Reuters.

India’s central bank announced new measures to encourage lending to the country’s cash-starved borrowers by injecting $6.5 billion into the banking system, ordering lenders to freeze dividends and easing rules on bad loans, Bloomberg News reported. In another effort to strengthen the financial system’s response to the coronavirus-fueled slowdown, Reserve Bank of India Governor Shaktikanta Das said the central bank will provide 500 billion rupees ($6.5 billion) in a new round of Targeted Long-Term Repo Operations.

Realtors’ body Naredco on Thursday demanded a stimulus package of at least USD 200 billion to revive the Indian economy from the adverse impact of COVID-19 as well as suspension of insolvency law provisions for six months to prevent companies from becoming bankrput and acquired by foreign entities, The Financial Express reported.

A looming economic crisis triggered by the coronavirus pandemic is a chance for India to enact sweeping reforms to fix ailing sectors and attract more foreign investment to the country, Bloomberg News reported. That’s a call being made by a former central banker and an ex-government official, as well as financial market participants, who say India needs to liberalize and deepen its financial markets, and take policy steps to fix the banking and farm sectors.

The world’s largest lockdown is, as expected, taking a toll on the Indian economy. Fitch Ratings Inc. expects that India will grow only 2% in the current financial year, Bloomberg News reported in a commentary. That would be the lowest rate in decades, a level not seen since this country was closed-off socialist backwater. But everyone knows that fighting a pandemic is costly. What’s even more worrying is how the costs of a slowdown—the sudden pressure on incomes and demand, in particular—will widen pre-existing cracks in the Indian growth story.