The government is unlikely to announce capital infusion for public sector banks (PSBs) in the upcoming budget because their financial health has improved significantly and they are on track to earn a combined profit of ₹1 lakh crore, according to PTI, citing sources.
For the first quarter of the current fiscal year, all 12 public sector banks earned a cumulative profit of about ₹15,306 crore, registering a 9.2% growth annually, while in the second quarter, the PSBs continued the same magnitude and posted a 50% YoY jump in combined net profit at ₹25,685 crore.
During the second quarter, SBI reported its highest-ever profit of Rs. 13,265 crore. On a YoY basis, this was 74 percent higher than the same quarter a year ago.
In the first half of FY23, the cumulative net profit of all PSBs increased by 32 percent to ₹40,991 crore. The combined profit more than doubled to ₹66,539 crore in 2021–22 despite COVID-19 pressure.
Following the RBI's rapid rate hikes, banks raised lending rates quickly but went slow on deposit rates, resulting in higher net interest margins in the second quarter. In addition, lower provisions have also contributed to the bank's profitability.
Bank's capital adequacy ratio is much above the regulatory requirement and varies between 14 and 20 per cent. To augment their resources, banks are raising growth funds from the market and also by selling their non-core assets, sources said.
The government last provided capital support to banks in 2021–2022. It had earmarked ₹20,000 crore for the recapitalization of PSBs through supplementary demands for grants.
The government infused ₹3,10,997 crore to recapitalise banks during the last five financial years - from 2016–17 to 2020–21. Out of which ₹34,997 crore were sourced through budgetary allocation and ₹2,76,000 crore through the issuance of recapitalisation bonds to these banks, according to sources.
Meanwhile, the gross NPA ratio of banks has fallen to a 7-year low of 5 percent in September 2022, while net non-performing assets (NNPA) have dropped to a 10-year low of 1.3% of total assets, according to the RBI.
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