Look at the government's measures in the budget with regard to injecting capital into banks

Mumbai, Ta. Saturday, January 30, 2021

In the next financial year, i.e. 2021-22, the government is likely to announce in the budget to invest an additional Rs 2,000 crore in public sector banks.

The finance ministry has sought information from the managers of the country's public sector banks on their capital requirements, the proposed amount of bad loans and their plans to raise funds, finance ministry sources said.

However, analysts say the government should focus on raising money in other ways than investing in banks, given the congestion.

In addition to setting up a bad bank for the banking sector in the country, issues including how much capital banks need are currently being discussed. The amount of capital to be invested in banks will depend on how much capital the banks can raise from the market and how their bad loans are positioned.

During the presentation of the budget for the current financial year, the finance minister did not announce any inflow of capital into the banks but later when he made a supplementary demand, it was announced to provide Rs 50,000 crore.

From FY2017 to FY2030, the government has invested Rs 4.5 lakh crore in public sector banks. At a time when the government is running out of money due to the Corona epidemic, it would be practical to sell money by selling its stake in banks instead of investing in banks, an analyst said.

The gross NPAs of the country's public sector banks, which stood at 7.50 per cent at the end of September 2020, are expected to rise to 12.50 per cent by the end of September this year.