Public sector banks (PSBs) may step-up the quantum of dividend pay-outs after the RBI recently announced a sharply lower surplus transfer of ₹30,307 crore to the government for FY22.

If the decision of Bank of Baroda (BoB) to convene a board meeting on May 31 “to consider and approve revision in dividend and consequent change in financial statements of FY22” is anything to go by, other PSBs too may follow suit.

BoB’s board of directors, at their meeting held on May 13, had recommended a dividend at ₹1.20 per equity share (face value ₹2 each fully paid up) for FY222.

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As per Union Budget for FY23, the government has pencilled in non-tax revenue of ₹73,948 crore (₹ 1,01,353 crore: Revised Estimate for FY22) by way of dividend/ surplus from the RBI,nationalised banks and financial institutions (FIs).

With the RBI declaring lower surplus transfer of ₹30,307 crore (against surplus transfer of ₹99,122 crore for nine months ended March 31, 2021), PSBs and FIs are likely to make up for shortfall, if any, in the non-tax revenue under the head dividend/surplus of RBI, PSBs and FIs.

Last year, barring State Bank of India, which had declared a dividend of ₹4 per equity share (400 per cent) for the financial year ended March 31, 2021, none of the PSBs had announced dividends in the wake of the Covid-19 pandemic and the need to conserve capital.

The biggest beneficiary

Being the owner and single largest shareholder of PSBs, the government will be the biggest beneficiary of any upward revision in dividend, say analysts.

Madan Sabnavis, Chief Economist, BoB, recently observed that the lower surplus transfer from RBI will mean that a large part of PSBs and FIs profit will have to be transferred to make good the non-tax revenue target under the head dividend/surplus of RBI, PSBs and FIs, or else there will be a slippage.

Meanwhile, Bank of Maharashtra, which had not declared any dividend for FY22 when its fourth quarter financial results were announced on April 28, announced that its board of directors will meet on May 25 to consider and approve the proposal for recommending dividend for FY22.

Among PSBs that have declared dividend for FY22 include SBI (₹7.10 per equity share/710 per cent); Punjab National Bank (₹ 0.64 per equity share/ 32 per cent); Canara Bank and Indian Bank (both ₹6.50 per equity share/ 65 per cent); Union Bank of India (₹1.90 per equity share/ 19 per cent); and Bank of India (₹2 per equity share/20 per cent).

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