Finance Minister Nirmala Sitharaman is expected to present the fourth budget of the Modi 2.0 government on February 1
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NEW DELHI :
The government is unlikely to announce capital infusion for public sector banks (PSBs) in the upcoming Budget, as their financial health has improved on the back of reduction in bad loans, sources said.
To augment their resources, banks would be encouraged to raise funds from the market and also by selling their non-core assets, they added.
In some of the non-performing assets, banks have done provisions up to 100 per cent, sources said, adding that recovery from those accounts will straightaway form part of the bottomline.
Banks have been asked to focus on the recovery process as this would further boost their financial health.
Meanwhile, banks are also working to expand their balance sheet under the credit outreach programme started October 16, 2021.
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.
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.
The primary reason for PSBs to post ₹57,832-crore turnaround in last financial year, from a loss of ₹26,015 crore in 2019-20 to a combined profit of ₹31,816 crore was the end of their legacy bad loan problem.
At the same time, comprehensive steps were taken to control and to boost recovery in NPAs, which enabled PSBs to recover ₹5,01,479 crore over the last six financial years.
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