For the first time in ten years, taxpayers' money will not flow into PSU banks

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MUMBAI: The decision not to inject new capital into public sector banks in next financial year's budget indicates that the position of the country's public sector banks has strengthened. The government has invested Rs 2.50 lakh crore in public sector banks since 2014.

Rating agencies believe that not investing in state-owned banks means that the government is confident that the capital position of banks will be strong. It is unlikely that the government will inject any capital into the banks in the next financial year.

Banks are in a position to raise money from the market due to strong balance sheets. Despite a budget provision of Rs 20,000 crore in the current financial year, the government has spent only Rs 15,000 crore, ICRA sources said.

Banks' profits have been on the rise due to the recent move by the Reserve Bank to bring discipline in state-owned banks. Banks also have the capacity to meet the country's credit demand, sources in India Ratings said.

After 2014, when banks were running at a loss and their asset quality was deteriorating, the government supported them by investing in them. Now the situation has changed, said another analyst.

The NNP, which was 9 per cent on March 31, 2016, fell to 6.50 per cent on September 30 last year. This is the first time in the last ten years that no new capital has been announced in banks, the analyst said.

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