PARIS, FRANCE - THE French government will inject 10.5 billion euros (S$20.7 billion) into the country's six biggest banks to boost economic activity as markets flag from a global credit crunch, officials said.

Among the beneficiaries, the biggest bank Credit Agricole will get 3 billion euros, Finance Minister Christine Lagarde told reporters after meeting with the heads of the banks.

BNP Paribas will get 2.55 billion euros and Societe Generale 1.7 billion euros, in moves to boost their after governments across Europe stepped in to support banks hard hit by the financial crisis.

Credit Mutuel will receive 1.2 billion euros, Caisse d'Epargne 1.1 billion euros and Banque Populaire 950 million euros, to ensure banks are 'able to finance the economy correctly,' Ms Lagarde said.

Lawmakers last week approved a 360-billion-euro package to support French banks. Several European countries had also agreed to plough capital into the hardest-hit banks and massively underwrite loans between financial players.

Under that plan, the French state provides 40 billion euros to recapitalise fragile banks. It also provides for up to 320 billion euros in inter-bank loan guarantees to overcome the credit crisis.

The governor of the Bank of France, Mr Christian Noyer, speaking alongside Ms Lagarde, insisted that French banks were not short of capital and did not need to be recapitalised by the government.

'The aim of the operation is not to recapitalise the banks... but to support the financing of the economy,' he said.

The funds being injected under Monday's agreement are aimed at boosting the banks' capital to bring them level with their competitors in other countries where governments have rescued major lenders from collapse.

'All the banking groups concerned currently have a totally satisfactory level of capital,' the central bank said in a statement released on Monday evening.

President Nicolas Sarkozy has pledged that no French bank will be allowed to collapse and that savers will not lose 'a single euro' in the global turmoil unleashed by the collapse of US investment giant Lehman Brothers last month.

Prime Minister Francois Fillon said earlier on Monday that French banks had agreed to increase lending by 3.0-4.0 per cent at an annual rate to finance economic activity.

'They have committed to pay particular attention to conditions for untying bridging loans to individuals and small businesses... to support their cash-flow,' he told reporters.

The volume of lending by banks is a key factor in controlling the money supply and thereby keeping inflation in check.

Mr Fillon also announced five billion euros' worth of special loans for local municipalities to help them cope with the effects of the credit crunch.