Budget Analysis: Banks have little to cheer about

BL RESEARCH BUREAU:  

Banks don’t have much to cheer in the Budget, but it has dealt a particularly hard blow to public sector banks. For them, the much-awaited ‘recapitalisation’ turned out to be a damp squib.

The Budget has earmarked only Rs 14,000 crore for infusing capital into these banks this year (in 2012-13, the number was Rs 12,000 crore). But as per the Reserve Bank of India estimate, the government will have to infuse additional capital of Rs 90,000 crore into these banks over the next five years. The markets expected at least Rs 18,000 crore this year. The capital adequacy ratio of PSU banks as of December 2012 was 12.2 per cent only just meeting the comfort level of the RBI at 12 per cent. With bad loans on the rise and higher provisioning cutting into internal accruals, capital infusion is crucial.

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