India is expecting a significant boost in dividends from its state-run banks for the fiscal year 2024/25, with an expected amount of $1.8 billion, according to a senior official from the Finance Ministry.

Under the leadership of Prime Minister Narendra Modi since 2014, efforts have been made to strengthen India's state banks. These measures include merging weaker banks with stronger ones and implementing a bankruptcy law to recover funds from defaulters. Additionally, over $39.7 billion has been channeled into recapitalizing stressed banks.

Vivek Joshi, India's financial services secretary, stated that the government is expecting a minimum of $1.8 billion in dividends from state banks for the fiscal year 2024/25, representing an increase of over 8.7% from the anticipated dividends of $1.38 billion for the current fiscal year ending in March.

Joshi highlighted that this estimate is conservative, considering the net profits of state banks, including the State Bank of India, which are projected to exceed $12 billion in the current fiscal year due to robust credit demand.

As of December, the 12 state-run banks have reported net profits totaling $12 billion, signifying significant progress in their financial performance. Moreover, the asset quality of state banks has shown improvement, with gross non-performing assets (GNPAs) declining to 3.2% in September 2023 from 9.6% in the March 2017 quarter, according to central bank data.

During the presentation of the interim budget last week, Finance Minister Nirmala Sitharaman estimated that the government would receive $12.3 billion in dividends from the Reserve Bank of India, state banks, and financial institutions for the fiscal year 2024/25, slightly lower than the $12.4 billion received in the current financial year.

It's worth noting that a significant portion of these dividends comes from the country's central bank. In the current fiscal year, the Reserve Bank of India transferred $874.16 billion in dividends to the government.

Joshi also mentioned that state banks have raised $430 billion through markets in the current fiscal year, indicating reduced dependence on budgetary support compared to the previous fiscal year's $450 billion.

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