Budget 2023: Govt may avoid capital infusion announcement for PSU banks

The government is unlikely to announce capital infusions for public sector banks (PSBs) in the next Budget because their financial health has greatly improved and they are on course to achieve a combined profit of Rs 1 lakh crore, PTI quoted sources as saying. Their capital adequacy ratio is significantly higher than the regulation threshold, ranging between 14 and 20 per cent. Banks are supplementing their resources by seeking expansion capital from the market as well as selling non-core assets, they noted.

The last time the government helped banks with capital was in 2021–2022. It had set aside Rs 20,000 crore through supplemental grant requests for the recapitalization of PSBs. In the last five fiscal years, from 2016–17 to 2020–21, the government invested Rs 3,10,997 crore to recapitalize banks, of which Rs 34,997 crore came from budgetary allocation and Rs 2,76,000 crore via the issuing of recapitalization bonds to these banks.

On February 1, Finance Minister Nirmala Sitharaman will unveil the Modi 2.0 government's fifth and final full budget. In the first quarter, the 12 public sector banks made a combined profit of roughly Rs 15,306 crore, which jumped to Rs 25,685 crore in the September quarter.

The rise was 9 per cent in the first quarter and shot up to 50 per cent in the second quarter when measured year over year. SBI declared the highest-ever profit for the second quarter of Rs 13,265 crore. This was 74 per cent more than it was the previous year.

The total net profit of all PSBs increased by 32 per cent to Rs 40,991 crore in the first half of FY23. Despite pressure from COVID-19, the joint profit more than doubled to Rs 66,539 crore in 2021–22.

The government's attempts to minimise bad loans are having an impact, according to the Finance Minister, who recently stated that 12 PSBs reported a 50% increase in total net profit at Rs 25,685 crore in the September quarter.

She had claimed that the government's 4Rs strategy—Recognition, Resolution, Recapitalization, and Reforms—had led to a decrease in NPAs.