Govt Set To Receive Rs 15,000 Cr Dividend From Public Sector Banks As Profitability Improves

Public sector banks (PSBs) are anticipated to pay a dividend exceeding Rs 15,000 crore for the financial year ending March 2024, buoyed by a significant uptick in profitability. 

In the initial three quarters of the ongoing fiscal year, all 12 PSBs collectively recorded a profit of Rs 98,000 crore, trailing only Rs 7,000 crore behind the entire fiscal year 2023. During FY23, PSBs achieved their highest-ever aggregate net profit of Rs 1.05 lakh crore, an increase from Rs 66,539.98 crore earned in the preceding fiscal year.

This growth in profitability translated into a notable dividend payout to the government. In FY23, the government received a dividend of Rs 13,804 crore from PSBs, a 58 per cent increase compared to the previous financial year. With the current fiscal year's profitability expected to surpass the previous year's figures, sources project a dividend payout to the government exceeding Rs 15,000 crore.

The anticipation of record dividends coincides with proposed regulatory changes by the Reserve Bank of India (RBI). In January, the RBI introduced draft guidelines aimed at permitting banks with a net non-performing assets (NPAs) ratio of less than 6 per cent to declare dividends. This marks a departure from the existing norms set in 2005, which require banks to maintain an NNPA ratio of up to 7 per cent to be eligible for dividend declaration. The proposed guidelines are slated to take effect from the financial year 2025 onwards.

The draft guidelines by the RBI further stipulate criteria for banks' eligibility to declare dividends. According to the proposed regulations, a commercial bank must possess a minimum total capital adequacy of 11.5 per cent to qualify for dividend declaration. Additionally, banks' boards are required to consider aspects such as divergence in classification and provisioning for NPAs when deliberating dividend payout proposals.