Public Sector Banks to Shell Out Rs.15,000 Crores in Dividends

Public sector banks (PSBs) in India are expected to pay a dividend exceeding Rs 15,000 crore for the financial year ending March 2024, driven by improved profitability. Sources indicate that in the first three quarters of the current financial year, all 12 PSBs collectively earned a total profit of Rs 98,000 crore, a mere Rs 7,000 crore less than their entire profit for the previous fiscal year (FY23).

During FY23, PSBs achieved their highest-ever aggregate net profit of Rs 1.05 lakh crore, a significant increase from Rs 66,539.98 crore earned in FY22. Consequently, the government received a dividend of Rs 13,804 crore, marking a 58 percent increase from the previous financial year's dividend payout of Rs 8,718 crore.

Given the expectation of higher profits in the current financial year compared to the previous year, sources anticipate that the dividend payout to the government for FY24 will likely exceed Rs 15,000 crore.

In January, the Reserve Bank of India (RBI) proposed draft guidelines suggesting that banks with a net non-performing assets (NPAs) ratio of less than 6 percent would be eligible to declare dividends. This marks a change from the existing norms, last updated in 2005, which required banks to have an NNPA ratio of up to 7 percent to qualify for dividend declaration.

The proposed guidelines, set to effect from FY25 onwards, outline specific directions for bank boards to consider when evaluating proposals for dividend payouts. These considerations include examining discrepancies in the classification and provisioning for NPAs.

Additionally, the circular stipulates that a commercial bank must maintain a minimum total capital adequacy of 11.5 percent to be eligible for declaring dividends.