New Delhi (13.12.2021): The government is unlikely to announce capital infusion for PSBs in the upcoming Budget, as their financial health has improved on the back of reduction in bad debts. Banks would be encouraged to raise funds from the market and also by selling their non-core assets to augment their resources.
During the current financial year, the government has earmarked ₹20,000 crore for the recapitalization of PSBs. Actually, the net profit of PSBs surged to ₹14,012 crore in the first quarter, which further rose to ₹17,132 crore in the second quarter ended September 2021. The combined profit of the first half of the current fiscal is close to the total profit earned in the entire previous financial year.
PSBs raised capital funds to the tune of ₹58,697 crore During the last financial year, the highest amount mobilised in a fiscal. Capital Adequacy Ratio (CAR) of PSBs increased to 14.3 per cent at the end of June, 2021 while the provision coverage ratio of public sector banks rose to an 8-year high of 84 per cent.
Meanwhile, banks are also working to expand their balance sheet under the credit outreach programme started October 16, 2021. NPAs of PSBs declined from ₹7,39,541 crore as on March 31, 2019, to ₹6,78,317 crore as on March 31, 2020 and further to ₹6,16,616 crore as on March 31, 2021 (provisional data).
Provision Coverage Ratio (PCR) at the same time increased sequentially to a high of 84 per cent. As a result, PSBs in aggregate recorded a profit of ₹31,816 crore, highest in five years, despite 7.3 per cent contraction in economy in 2020-21 due to COVID-19 pandemic.
