Shares in the banking sector traded mostly higher in the early trade on Tuesday, ahead of the presentation of the Union Budget by the Finance Minister Nirmala Sitharaman in the Parliament at 11 am today. The banking stocks, especially private banks, were trading higher on the expectation that the government would announce bold policy measures to strengthen the digital infrastructure for the banking sector.

At 10:40 AM, the BSE Bankex index was at 44,347.47, up by 777.99 points, or 1.79%. Meanwhile, the benchmark BSE Sensex was at 58,768, up 754 points, or 1.3%.

The top five gainers in the banking space were IndusInd Bank (₹900, 3.23%), ICICI Bank (₹809.95, 2.62%), Axis Bank (₹789.75, 2.15%), HDFC Bank (₹1,513.00, 1.85%), and Kotak Mahindra Bank (₹1,888.20, 1.65%).

Meanwhile, State Bank of India, the country’s largest lender, edged lower, down 0.3% at ₹536.

As per market experts, the central government is unlikely to announce capital infusion for public sector banks (PSBs) in the Budget 2022-23, as their financial health has improved amid drop in bad loans. For the financial year 2021-22, the government has earmarked ₹20,000 crore for the recapitalisation of state-owned lenders.

Non-performing assets of PSBs declined from ₹7,39,541 crore as on March 31, 2019, to ₹6,78,317 crore as on March 31, 2020 and further to ₹6,16,616 crore as on March 31, 2021 (provisional data). Provision Coverage Ratio (PCR) at the same time increased sequentially to a high of 84%.