The government is unlikely to announce capital infusion for public sector banks (PSBs) in the upcoming budget, as their financial health has improved on the back of reduction in bad loans, sources said.

To augment their resources, banks would be encouraged to raise funds from the market and also by selling their non-core assets, they added.

During the current financial year, the government has earmarked Rs 20,000 crore for the recapitalisation of PSBs. Finance minister Nirmala Sitharaman is expected to present the fourth budget of the Narendra Modi 2.0 government on February 1.

It is to be noted that the net profit of PSBs surged to Rs 14,012 crore in the first quarter, which further rose to Rs 17,132 crore in the second quarter ended September 2021.

The combined profit of the first half of the current fiscal is close to the total profit earned in the entire previous financial year.

During the last financial year, PSBs raised capital funds to the tune of Rs 58,697 crore, the highest amount mobilised in a fiscal.

Capital Adequacy Ratio (CAR) of PSBs increased to 14.3 per cent at the end of June, 2021, while the provision coverage ratio of public sector banks rose to an 8-year high of 84 per cent.