Govt Banks Recorded Rs 17,000 Crore Profit In 90 Days: Govt Can Refuse To Give More Money To Public Sector Banks Now
In the upcoming Budget, underlined as the fourth Budget of the Modi government in its second tenure, to be held on February 1, 2022 by the Finance Minister Nirmala Sitharaman, the chances of her announcing to infuse capital for public sector banks (PSBs) is low, due to improvement of financial health of banks in the ongoing year as bad loans have largely reduced, cite sources.
The non-performing assets or NPAs of PSBs in India have reduced to Rs 6.16 crore as on March 31, 2021, compared to Rs 6.78 crore on March 31, 2020 and Rs 7.39 crore in the same period in 2019.
Financial Health of PSBs Improve
The financial health of public sector banks have shown very good improvement in the ongoing financial year despite the economy crippling by 7.3% in 2020-21 due to COVID-19 pandemic.
The net profit of PSBs have rallied to Rs 14,012 crore in Q1 FY22, further rising to Rs 17,132 crore in the second quarter of the ongoing financial year.
The combined profit in only the first half of FY22 is almost equal to the total profit earned in the entire previous financial year, FY21.
Additionally, the Capital Adequacy Ratio of PSBs, a measure of how much capital a bank has available, has risen to 14.3% at the end of June, 2021, while the provision coverage ratio of public sector banks rose to an 8-year high of 84%, stated a PTI report.
For some cases of NPAs, banks have made provisions up to the scale of 100%, which will directly add to the company’s bottomline, improving the figure vividly.
Govt to Not Announce Capital Infusion For PSBs
Backed on reduction in bad loans, thereby improving the financial health of public sector banks, the Sitharaman-led financial ministry appears unlikely to announce capital infusion for public sector banks in the upcoming Budget.
Sources have cited that the financial institutions (PSBs) would be encouraged to raise funds from the market and also by selling their non-core assets, for boosting their resources.
Additionally, the government has set aside a sum of Rs 20,000 crore for the recapitalisation of PSBs.
Various reforms undertaken by the government including recognition, resolution and recapitalisation resulted in progressive decline in non-performing assets (NPAs) and subsequent rise in profit.
Comprehensive steps have been taken by the government to control and boost recovery in NPAs, which have led the banks to recover Rs 5,01,479 crore over the last six financial years.