State-run banks to pay ₹8,000 cr dividend to govt
MUMBAI: State-run banks have paid substantial dividends to their shareholders, many of them after a gap of nearly six years, as credit growth accelerated and asset quality improved.
The government stands to be the biggest beneficiary of the generous payouts by the banks and is expected to net nearly ₹8,000 crore. State-run banks, barring Central Bank of India, which is still under the Reserve Bank of India’s (RBI’S) restrictive prompt corrective action framework (PCA) for weak banks, reported improved performance in the year ended March 31.
The payouts by state-run banks come as a minor relief to the government, which is struggling to generate resources amid higher spending on subsidies and tax cuts to cool inflation. The RBI also approved a lowerthan-expected ₹30,307 crore as dividend to the government for the year ended March 2022, upsetting the government’s budget maths.
The highest payout to the government is from the country’s largest lender State Bank of India, which will pay a dividend of ₹3,600 crore. Union Bank will pay ₹1,084 crore, followed by Canara Bank at ₹742 crore and over ₹600 crore each by Indian Bank and Bank of India.
However, some banks, including Indian Overseas Bank (IOB) and IDBI Bank, did not announce any dividend this time, despite reporting a fullyear profit. Uco Bank has, however, sought regulatory approval for declaring dividends as the lender just exited the PCA framework, while Central Bank is barred from announcing any payout because of the RBI restrictions. Bank of Maharashtra’s board will decide on a dividend payout on Wednesday.
“As per Banking Regulation Act, no banking company shall pay any dividend on its shares until all its capitalized expenses, including carry-forward losses, have been completely written off. Although IOB has doubled its profit (Rs 1,710 crore from Rs 831 crore the previous year), we could not declare a dividend as we incurred annual losses from 2015 to 2020, the years the bank was under PCA. From last year onwards, we have started building up reserves,” said Partha Pratim Sengupta, managing director and chief executive of Indian Overseas Bank.