New Delhi: Hit by demonetisation and mounting bad loans, some public sector banks (PSBs) may skip paying dividend which will have implications for government receipts in the current fiscal.
Some public sector undertaking (PSU) bankers have already indicated to the finance ministry that it may not be possible for them to pay dividend as their profits are likely to remain subdued due to lower credit offtake and rising non performing assets (NPAs), sources said without specifying the names of the banks.
As a result, they said, it is expected that the revenue from dividend from public sector banks is likely to be less than Rs1,000 crore as many banks are going to skip dividend payment this financial year.
Gross NPAs of PSBs rose to Rs6,30,323 crore at the end of 30 September, as against Rs5,50,346 crore by June 2016. According to analysts, normal banking operation was hit for almost two months due to demonetisation leading to decline in income operation of banks.
The credit offtake hit a record low of 5.3% following note-ban. At this point of time, it seems difficult proposition that banks would be able to pay dividend this year when all of them are seeking higher capital, sources said.
Last fiscal, as many as 16 PSBs, including PNB, BoB and Canara Bank, skipped paying dividend in 2015-16, leading to three-fold decline in government receipts to Rs1,444.6 crore.
Only six state-owned banks including SBI declared dividend, though at a lower rate, for the financial year ended March 2016.
Under the existing guidelines, profit making banks have to pay a minimum dividend of 20% of their equity or 20% of their post tax profit, whichever is higher.
The government, which is the majority shareholder in all the public sector banks, witnessed 67% decline in dividend receipt from PSU banks at Rs1,444.6 crore as against Rs4,336.22 crore in the previous fiscal.
According to the finance ministry data, the highest dividend was paid by SBI to government at Rs1,214.6 crore during 2015-16, 22% lower than the previous fiscal. As regards Union Bank of India, the dividend payout was one-third of the previous fiscal at Rs85 crore. For Oriental Bank of Commerce, it was one-fifth compared to the previous financial year at Rs12.4 crore despite increase in government holding due to capital infusion.
Those which skipped dividend payments included Allahabad Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Corporation Bank, Punjab National Bank, Dena Bank and Syndicate Bank.