The finance ministry has not budgeted for any dividend payouts from 9 state-owned banks during the next fiscal with rising bad loans.
In an indication that the government has taken cognizance of public sector banks (PSBs) under the stress of bad loans, the finance ministry has not budgeted for any dividends from at least nine PSBs during the next fiscal, according to a report in a leading daily.
A statement by the finance ministry revealed that only just five banks which include Andhra Bank, Canara Bank, Punjab & Sind Bank, Union Bank and State Bank of India are in line to pay dividends during the current financial year.
The report said that the dividend payout is expected to be much lower than what the government had originally budgeted for.
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 Rs 5,100 crore, as against Rs 10,433 crore budgeted dividend payment estimates for 2015-16.
Around Rs 2,215 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 Rs 1,143 crore and Bank of Baroda Rs 501 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.
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