Business

Govt may not announce capital injection for PSU banks within Budget 2023-24

January 23, 2023 by Investors and Startups

Sources said that the government will not announce capital infusions for public sector banks (PSBs), in the forthcoming Budget, as their financial health has improved and they are on track for a combined profit of Rs 1. lakh crore.

Their capital adequacy ratio exceeds the regulatory requirement, and it varies between 14-20%

Banks are increasing their resources by raising growth funds on the market, as well as selling non-core assets to increase their capital.

In 2021-22, the government provided capital support for banks. It had allocated Rs 20,000 crore to recapitalize PSBs via supplementary requests for grants.

In order to recapitalise banks, the government invested Rs 3,10,997 Crore in the five most recent financial years, i.e., 2016-17 to 2020-21. Rs 34,997 Crre was sourced through budgetary allocation, and Rs 2,76,000 crore through the issuance recapitalization bonds.

On February 1, Finance Minister Nirmala Sitharaman will present the fifth and last full budget of Modi 2.0 government.

The cumulative profit of all 12 public sector banks was Rs 15,306 crore for the first quarter. This figure increased to Rs 25,685 crore for the September quarter.

Year-on-year, the growth was 9% in the first quarter and 50% in the second.

SBI’s second quarter profit was Rs 13,265 crore, the highest ever. This was 74% more than the previous year.

The cumulative net profit from all PSBs increased 32 percent to Rs 40 991 crore in the first half FY23. Despite COVID-19 pressure, the combined profit increased more than twice to Rs 66 539 crore in 2021-22.

After a hiatus, many state-owned banks also declared dividends for the last financial year. Nine banks, including SBI declared dividends totaling Rs 7,867 crore for shareholders.

Recent statements by the Finance Minister have indicated that efforts to reduce bad loans are paying off. 12 PSBs reported a 50% jump in net profit at Rs 25,685 Crore in the September quarter.

She had stated that NPAs have declined due to the government’s 4R strategy of Recognition Resolution, Recapitalisation, Reforms.