For the first time since FY08, the government is unlikely to infuse capital into state-run banks this fiscal as public sector banks reported good numbers in FY22, Financial Express reported, quoting banking sources.
The finance ministry may not allocate capital for PSBs as part of the revised estimates for FY23. This is because public-sector banks (PSBs) recorded good profitability in FY22 and in the first quarter of this fiscal, and their bad loan ratio showed steady improvement, the report said.
In the Budget for FY23, the government hasn’t earmarked any outlay for re-capitalization. However, it can always allocate capital for PSBs later in the fiscal by approving supplementary demands if there is a pressing demand.
For instance, it had to approve ₹20,000 crore in the revised estimate for FY21 to help PSBs shore up their capital base, even though it hadn’t budgeted anything initially, it added.
In FY22, the government trimmed the infusion requirement to ₹15,000 crore in the revised estimate from the budgeted ₹20,000 crore. Recapitalisation in recent years has been through bonds.
The government was forced to infuse as much as ₹3.3 trillion into state-run banks between FY16 and FY21 to help them cope with the bad loan crisis. At an aggregate level, the capital to risk-weighted assets of state-run banks stood at 14.6% as of March 2022, against the requirement of 10.87%.
The credit growth in the banking system remains strong. Bank credit growth accelerated to 16.28% for the fortnight that ended September 23, according to RBI data.
The overall non-food credit stood at ₹130.06 lakh crore as on September 23, as against ₹111.85 lakh crore in the year-ago period on September 24, 2021.
Meanwhile, all 12 public sector banks earned a total profit of about ₹15,306 crore in Q1FY23, representing a 9.2% increase year on year. State-owned banks made a total profit of ₹14,013 crore between April and June of the previous fiscal year. Furthermore, the credit rating agency firm S&P expects bank non-performing loans to fall to 5-5.5% of total advances by 2024.
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