The government is likely to pump capital in public sector banks during the last quarter of the current financial year to meet the regulatory requirements. The government in the Budget 2021-22 has allocated Rs 20,000 crore for the capital infusion in the state-owned banks.

The capital position of banks will be reviewed in the next quarter, and depending on the requirement, the infusion will be made to meet the regulatory needs.

In the current fiscal year, all 12 public sector banks have posted a profit, which is being ploughed back to bolster the banks’ balance sheet, media reported.

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In the future, they said, the rise in stressed assets would determine capital requirement. If numbers are anything to go by, the sources said, the financial health of public sector banks are showing gradual signs of improvement across the spectrum.

Last month, the Reserve Bank removed UCO Bank and Indian Overseas Bank from prompt corrective action framework (PCAF), following various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.