Decrease in capital inflows in banks in last 12 years

- PSU banks easily raised money from the market due to improved financial condition

The government has not required capitalization of any state-run banks except Punjab and Sind Bank in the current financial year. This will probably save Rs 10,500 crore out of the Rs 15,000 crore earmarked for this purpose in the revised estimates (RE) for FY2. This can be considered as the lowest capital inflow by the government in the last 15 years.

Last month, Punjab and Sind Bank sought approval from its board to raise equity capital of Rs 4,500 crore by issuing preference shares to the government, which would enable it to increase its capital adequacy. The government has not budgeted any amount for recapitalization for the next financial year. Public Sector Banks (PSBs) reported profit in FY11 despite the epidemic. In addition, many of them have raised significant capital in the last two years. "

The senior banker said that since all public sector banks are well-capitalized, their ability to accelerate lending and accelerate economic growth will not be weakened. Some analysts expected further capitalization of the Central Bank of India, the only state-owned bank still under the Reserve Bank's Prompt Corrective Action (PCA) framework for distressed lenders. However, with the improvement in its balance sheet (the bank's net profit was Rs 3 crore in the December quarter and capital adequacy increased to 12.5%), it will not need more capital from the government this financial year. It is likely to exit PCA soon.

The potential savings come at a time when the government is assessing the impact of a surge in global crude oil prices on its budgetary math for the current financial year and next. It is expected that the fertilizer subsidy bill will exceed Rs 10,000 crore more than the revised estimate for this financial year and also in FY23. Similarly, the tax on fuel is expected to be cut soon to alleviate the impact on consumers, which will also boost the Centre's revenue. Due to the epidemic, general government debt has been elevated to about 20% of GDP. The financial health of state-run banks has improved with a profit of Rs 31.50 crore in FY11.

Due to the improved financial condition, banks have lost a record Rs. 2.8 crore, of which Rs. Includes equity capital of Rs 10.5 crore. In this financial year 20, Rs. More than 2.5 crore. In the first eight months of the current financial year, PSBs raised about Rs 4.5 crore.

The quality of assets of public sector banks has also continued to improve. By September 2021, net bad loans had fallen from a high of 7.5% in March 2013 to a low of 7.5%. Similarly, its capital adequacy as of March 2021 was about 15%. Which is much higher. Pressure on capitalization of state-owned banks has eased amid internal earnings, fresh capital injections and declining asset-quality risks.