Only five banks likely to pay dividends to govt, report says
21 March 2016
The government will not be getting any returns by way of dividends from public sector banks steeped in non-performing loans, perhaps with the exception of a few banks. The government has not budgeted for any dividends from at least nine PSBs during the next fiscal, according to a report.
The finance ministry would, instead have to find ways of recharging the state-run banks with fresh capital to avoid capital erosion due to rising stressed or bad loans.
Reports quoting a finance ministry statement revealed that only five banks, including Andhra Bank, Canara Bank, Punjab and Sind Bank, Union Bank and State Bank of India, are in a position to pay dividends during the current financial year, which should be made available during the next fiscal, beginning April.
Even the dividend payout expected by these few banks also would be much lower than what the government had originally budgeted for, says the report.
The government in its revised estimates for the budget has reduced the dividend payments from banks, financial institutions and insurance companies by almost half to under Rs5,100 crore, as against Rs10,433 crore budgeted for 2015-16.
Around Rs2,215 crore, which is a third of the amount, is expected to come from LIC. While State Bank of India's (SBI) dividend contribution is expected to be Rs1,143 crore and Bank of Baroda Rs501 crore.
The nine banks will not be paying dividend to shareholders for the second year in a row. In the current fiscal, 32 state-owned banks, financial institutions and insurance companies are not going to pay dividends, said the report.
Most of these institutions apart from IIFCL and Bharatiya Mahila Bank were budgeted to pay out hefty dividends during the current fiscal.
The Reserve Bank of India's decision to reclassify several loans to companies where repayments have been irregular has resulted in many PSBs such as Bank of Baroda, Bank of India, IDBI Bank, Indian Overseas Bank and Oriental Bank of Commerce reporting losses.
On the other hand, SBI and PNB have reported a sharp drop in profits as they had set aside provisions for the non-payment of loans by several companies.