Budget 2023: Govt may not announce capital infusion for public sector banks amid improved financial health of lenders

In the upcoming Budget, the government is unlikely to announce capital infusion for public sector banks (PSBs), said PTI citing sources. This is due to the fact that their financial health has significantly improved and they are expected to make a combined profit of Rs 1 lakh crore, it added.

Their capital adequacy ratio varies between 14-20 per cent which is much above the regulatory requirement.

To augment their resources, banks are raising growth funds from the market and also by selling their non-core assets, PTI further said citing sources.

The government last provided capital support to banks in 2021-22. It had earmarked Rs 20,000 crore for recapitalisation of PSBs through supplementary demands for grants.

The government infused Rs 3,10,997 crore to recapitalise banks during the last five financial years i.E., from 2016-17 to 2020-21, out of which Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalisation bonds to these banks.

Finance Minister Nirmala Sitharaman is scheduled to present the fifth and final full Budget of the Modi 2.0 government on February 1.

All the 12 public sector banks earned a cumulative profit of about Rs 15,306 crore in the first quarter which increased to Rs 25,685 crore in the September quarter.

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On a year-on-year basis, the growth was 9 per cent in the first quarter while it surged to 50 per cent in the second quarter.

During the second quarter, SBI reported the highest-ever profit of Rs 13,265 crore. On a year-on-year basis, this was 74 per cent higher, said PTI.

In the first half of FY23, the cumulative net profit of all PSBs increased by 32 per cent to Rs 40,991 crore. The combined profit more than doubled to Rs 66,539 crore in 2021-22 despite COVID-19 pressure.

Many state-owned banks after a hiatus also declared dividends in last financial year. In all, nine banks, including SBI, declared dividends of Rs 7,867 crore to shareholders.

Recently, the Finance Minister had said the government's efforts to reduce bad loans are yielding results with 12 PSBs reporting a 50 per cent jump in combined net profit at Rs 25,685 crore in the September quarter, PTI said.

NPAs declined as a result of the government's 4Rs strategy of Recognition, Resolution, Recapitalisation and Reforms, she had said.

(With PTI inputs)