The central government will not infuse any capital into public sector banks (PSBs) this financial year (FY23). According to a report in the Financial Express (FE), this will happen for the first time since FY08.
The reason for this, according to the report, is that PSBs have recorded good profitability in FY22 and the bad loan ratio has shown steady improvement. Currently, there are no PSBs under prompt corrective action (PCA).
“PSBs’ capital adequacy remains sound this fiscal. No PSB is under the prompt corrective action regime anymore. Also, given their improved financials, they are in a position to raise capital from the markets themselves. So, there are very remote chances of recapitalisation (this fiscal),” an official told FE.
The Centre had not earmarked any funds for the recapitalisation of PSBs in Budget 2022. However, the money can be allocated by approving supplementary demands, the report added.
Between FY16 and FY21, the government allocated Rs 3.3 trillion to the PSBs. It has helped the banks in improving their balance sheets and the capital-to-risk-weighted assets ratio (CRAR). Against the requirement of 10.87 per cent, the CRAR of PSBs as of March 2022 was 14.6 per cent.
The bad loans dropped to a six-year low of 7.6 per cent in March 2022 and non-food credit growth was recorded at 16 per cent in August. This was 6.7 per cent in August 2021.
Also, the banks recorded a cumulative profit of Rs 15,306 crore in Q1FY23, showing a growth of over 9 per cent.