For SBI, the growth in core net interest income and operating profit has hardly kept pace with the rising bad loan provisioning in the past two to three years.

While the Centre’s mega recap plan will alleviate the pain, a few points are worth noting.

One, the capital that the Centre has infused over the past several years has not aided growth and only helped banks fund losses on account of huge loan defaults. For SBI, the story does not appear to be different from its peers. Between FY14 and FY17, the bank has received nearly ₹18,000 crore as capital from the Centre. But the loan growth during this period has been modest at 9 per cent (compounded annual growth).

Interestingly, SBI has received the most capital from the government. Of the ₹23,000 crore infused by the Centre in 2016-17, SBI received about a third — ₹7,575 crore. In 2016-17, SBI’s loan growth stood at 7.8 per cent, core net interest income grew by 8 per cent and net profit by just 5 per cent. Much of the capital that will be infused will likely be deployed to absorb incremental provisioning on bad loans. A substantial pick-up in lending and hence, core performance, is unlikely anytime soon.

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