The Government is unlikely to announce capital infusion for public sector banks (PSBs) in the upcoming Budget as their financial health has improved significantly and they are on track to earn a combined profit of ₹1 lakh crore, sources said.
Their capital adequacy ratio is much above the regulatory requirement and varies between 14-20 per cent.
To augment their resources, banks are raising growth funds from the market and also by selling their non-core assets, they added.
The Government last provided capital support to banks in 2021-22. It had earmarked ₹20,000 crore for recapitalisation of PSBs through supplementary demands for grants.
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The Government infused ₹3,10,997 crore to recapitalise banks during the last five financial years i.e., from 2016-17 to 2020-21, out of which ₹34,997 crore were sourced through budgetary allocation and ₹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.
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All 12 public sector banks earned a cumulative profit of about ₹15,306 crore in the first quarter, which increased to Rs 25,685 crore in the September quarter.
On a year-on-year basis, the growth was 9 per cent in Q1, while it surged to 50 per cent in Q2.
During the second quarter, SBI reported the highest-ever profit of ₹13,265 crore. On a year-on-year basis, this was 74 per cent higher.
In H1 FY23, the cumulative net profit of all PSBs increased by 32 per cent to ₹40,991 crore. The combined profit more than doubled to ₹66,539 crore in 2021-22 despite Covid-19 pressure.
Many State-owned banks after a hiatus also declared dividends in the last financial year. In all, nine banks, including SBI, declared dividends of ₹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 ₹25,685 crore in the September quarter.
NPAs declined as a result of the government's 4Rs strategy of Recognition, Resolution, Recapitalisation, and Reforms, she had said.