Public Sector Banks Projected To Pay Whooping 15,000 Cr Dividend To Investors – Check Eligibility (image source: canva)
Public sector banks (PSBs) in India are projected to pay dividends exceeding Rs 15,000 crore for the financial year ending March 2024, for to improved profitability form last few financial years. Check full details
PSBs Record Profits in FY23
In the first three quarters of the current financial year, all 12 PSBs collectively earned a profit of Rs 98,000 crore, just Rs 7,000 crore short of the total for FY23. The PSBs recorded their highest-ever aggregate net profit of Rs 1.05 lakh crore during FY23, a significant increase from the Rs 66,539.98 crore earned in 2021-22.
Government’s Dividend Earnings
The government, as a result of these record profits, earned a dividend of Rs 13,804 crore, marking a 58 per cent increase from the Rs 8,718 crore paid out in the previous financial year.
Projected Dividend Payout for FY24
Given the higher profits expected in the current financial year compared to the previous one, the dividend payout to the government is also expected to be much higher. Based on past trends, sources suggest that the dividend payout for FY24 could exceed Rs 15,000 crore.
Reserve Bank’s New Guidelines
In January, the Reserve Bank proposed draft guidelines allowing banks with a net non-performing assets (NPAs) ratio of less than 6 per cent to declare dividends. This is a change from the existing norms, last updated in 2005, which require banks to have an NNPA ratio of up to 7 per cent to be eligible for declaring dividends.
Implementation of New Guidelines
The central bank has proposed that these new guidelines should come into effect from FY25 onwards. The draft guidelines outline the directions that bank boards need to follow when considering dividend payouts. This includes considerations on divergence in classification and provisioning for NPAs.
Eligibility for Declaring Dividends
According to the circular, a commercial bank should maintain a minimum total capital adequacy of 11.5 per cent to be eligible for declaring dividends.
