Home / Budget / Budget Expectations /  Budget 2023: FM Sitharaman unlikely to announce capital infusion for PSU banks
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In a deviation from recent years, the 2023 Budget is unlikely to contain provisions for capital infusion in public sector banks. With the financial health of PSBs improving significantly in the past year, they are now on track to earn a combined profit of 1 lakh crore. Finance Minister Nirmala Sitharaman is scheduled to present the fifth and final full Budget of the Modi 2.0 government on February 1.

The Narendra Modi-led administration infused an unprecedented 3,10,997 crores to recapitalise banks during the last five financial years, with 20,000 crore being earmarked for the recapitalisation of PSBs through supplementary demands for grants in the last financial year.

Sitharaman had recently lauded the government's efforts to reduce bad loans, noting that 12 PSBs had reported a 50% jump in combined net profit at 25,685 crore in the September quarter. She also said that NPAs had declined as a result of the government's 4Rs strategy of Recognition, Resolution, Recapitalisation and Reforms.

Public sector banks have come a long way since 2017, when they posted a net loss of 85,390 crore. PSBs showed a profit of 66,539 crore in FY22 and are estimated to touch a milestone of 1 lakh crore by the end of the current fiscal.

PSBs suffered from a host of problems in recent years, with many on the brink of default and share prices hitting rock bottom. Plagued by a slew of problems including a dismally low capital base, unprofessional management, demoralised staff and huge inefficiencies, PSBs booked collective losses to the tune of 2,07,329 crore for five straight years. The highest amount of net loss was registered in 2017-18 at 85,370 crore.

In the first half of FY23, the cumulative net profit of all PSBs increased by 32% to 40,991 crore. Despite the looming specter of COVID-19, the combined profit had more than doubled to 66,539 crore in 2021-22.

According to reports quoting sources, their capital adequacy ratio is now much above the regulatory requirement and varies between 14-20%. Banks are also raising growth funds from the market and selling their non-core assets to augment their resources.

(With inputs from agencies)

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