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. Last Updated: 07/27/2016

State May Reduce Capital Injection Size

The government may reduce the size of the planned state capital injection for the banking sector through special government bonds this year, Deputy Finance Minister Tatyana Nesterenko said Thursday.

The Finance Ministry planned to issue 210 billion rubles ($6.69 billion) of the OFZ bonds this year and 250 billion rubles in 2010.

“Such a volume of resources is being questioned. The Finance Ministry and the Central Bank are now thinking, evaluating once more, whether such a volume of funds is necessary,” Nesterenko told reporters. “It is possible there will be less.”

The government is counting on commercial lenders to help the real economy with affordable credit and in return has promised to boost banks’ capital in the face of rising bad loans.

But signs of a nascent economic recovery have prompted the Central Bank to become more optimistic on the scale of bad loans in the sector.

Banks will need to meet certain criteria, including having assets of no less than 30 billion rubles, in order to qualify for the capital injection scheme. They can then exchange their preferred shares for the special OFZ bonds and use the bonds as collateral to get cash from the Central Bank.