Mumbai: The government is unlikely to announce capital infusion for the public sector banks (PSBs) in the upcoming Budget and will rather encourage them to expedite recovery of bad loans and raise funds from the market.
Besides, sources said, banks may also look for divesting or selling their non-core business as part of fund raising exercise during 2020-21. Finance Minister Nirmala Sitharaman is expected to present the second budget of the Modi 2.0 government on February 1.
According to sources, banks have robust pipeline of recovery from the resolution of both NCLT and non-NCLT cases during this calender year and also headroom for raising capital from the market.
The provision coverage ratio of public sector banks is at a 7-year high of 76.6%.
In some of the non-performing assets, banks have done provisions up to 100%, sources said, adding that recovery from those account will straightaway form part of the bottomline.
Share price of some of the banks are firming up which provide them opportunity to dilute government holding, sources said.
Country's largest lender State Bank of India (SBI) has already initiated the process of diluting its stake in its subsidiaries SBI Cards and Payment Services Ltd and UTI Mutual Fund.
It is looking to sell 50 lakh shares representing 1.01% stake in the National Stock Exchange (NSE). Similar exercise is being undertaken by other state-owned lenders as well in an effort to raise capital.
In addition, the government has already front loaded Rs 68,855 crore, out of Rs 70,000 crore earmarked for capital infusion for the current fiscal, to take care of the mega-merger plan announced in August, 2019.
Among all four anchor banks -- Punjab National Bank was given Rs 16,091 crore, Union Bank of India Rs 11,768 crore, Canara Bank Rs 6,571 crore and Indian Bank Rs 2,534 crore.