PSBs on track to reach Rs 1 lakh crore profit this year

The government is unlikely to announce capital infusions for public sector banks PSBs in the next budget, as their financial health has improved and they are on course to reach a combined profit of 1 lakh crore, according to sources quoted by PTI. Their capital adequacy ratio is significantly higher than the regulation threshold, ranging between 14 and 20 per cent. Banks are supplementing their resources by seeking expansion capital from the market and selling non-core assets, they noted.

The last time the government helped banks with capital was in 2021, 2022. It had set aside Rs 20,000 crore through supplemental grant requests for the recapitalization of PSBs. The government has invested Rs 3,10, 997 crore in the last five fiscal years to recapitalize banks, of which Rs 34,997 crore came from budget allocation and Rs 2,76, 000 crore issuing recapitalization bonds to these banks.

Finance Minister Nirmala Sitharaman will unveil the fifth and final full budget of the Modi 2.0 government on February 1. The first quarter saw a combined profit of around 15,306 crore, which jumped to 25,685 crore in the September quarter.

The rise was 9 per cent in the first quarter and up to 50 per cent in the second quarter compared to the year-on-year period. SBI declared the highest profit for the second quarter of Rs 13,265 crore. This was 74 per cent more than the previous year.

In the first half of FY 23 the net profit of all PSBs increased by 32 per cent to Rs 40,991 crore. Despite pressure from COVID 19, the joint profit more than doubled to Rs 66,539 crore in 2021-22.

The Finance Minister recently stated that 12 PSBs reported a 50% increase in net profit at Rs 25,685 crore in the month of September, which is a result of the government's efforts to minimise bad loans.

She had claimed that the 4 Rs strategy of recognition, resolution, recapitalization and reforms had resulted in a decrease in NPAs.