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Rising profits at India's state-run banks could produce nearly $2 billion in dividends for the government in the next fiscal year starting in April, a solid jump from this year, a top finance ministry official said.
Since taking charge in 2014, Prime Minister Narendra Modi has taken steps to strengthen state banks including merging weaker banks with stronger ones and a bankruptcy law to recover money from defaulters, while channeling more than Rs 3.3 trillion ($39.7 billion) to recapitalise stressed banks.
The government expects to receive at least Rs 15,000 crore ($1.8 billion) in dividends from state banks in 2024/25, up 8.7% or more from an expected Rs 13,800 crore in the current fiscal year ending in March, Vivek Joshi, India's financial services secretary, said late on Monday.
"This is a conservative estimate (about dividends)," Joshi, told Reuters in a post-budget interview, noting net profits of state banks, including India's largest bank, State Bank of India , were set to cross Rs 1 trillion ($12 billion) in the current fiscal year, fuelled by strong credit demand.
The 12 state-run banks have reported net profits totalling Rs 98,000 crore in three quarters ending December, said Joshi, one of the top officials at the finance ministry.
The asset quality of state banks also has improved over the years, with gross non-performing assets (GNPAs) declining to 3.2% in September 2023, from 9.6% in the March 2017 quarter, central bank data showed.
Finance Minister Nirmala Sitharaman, while presenting the interim budget last week, estimated the government would receive Rs 1.02 trillion ($12.3 billion) in dividends from the Reserve Bank of India, state banks and financial institutions in 2024/25 as against Rs 1.04 trillion in current financial year.
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Every year, a large chunk of the dividends comes from the country's central bank. The Reserve Bank of India (RBI) transferred Rs 87,416 crore in dividends to the government in the current fiscal year.
State banks have raised Rs 43,000 crore through markets in the current fiscal year so far, compared to Rs 45,000 crore in all of the last fiscal year, Joshi said, indicating banks were no more dependent on budgetary support.
