Mumbai, Feb. 26: Public sector banks, battling deteriorating asset quality, are paying well over Rs 1,000 crore to the government as interim dividend for this year.
Nothwithstanding the pressure of higher provisions for non-performing assets and the need to beef up capital, public sector lenders are ready to pay dividend to the government, which is its largest shareholder.
The State Bank of India has convened a board meeting on March 3 to consider the issue.
The country’s largest bank had last issued an interim dividend in 2010. It has paid out such dividends only four times in the past 20 years.
Nearly all the nationalised banks have declared interim dividends in January ranging from Rs 0.70 per share to Rs 11 per share. In some cases, banks have declared dividends after a long hiatus, while it is the first time for several others.
Dena Bank, which will pay Rs 1.10 per share to its shareholders, had never issued any interim dividend.
Such payouts come at a time lenders are in a sticky wicket over asset quality, resulting in higher provisioning and eroding bottomlines. The SBI posted a 34 per cent decline in net profit at Rs 2,234.34 crore for the December quarter on higher provisioning for bad loans.
Capital market analysts believe the interim dividend payouts come at the directive of the government, which has been keen to contain the fiscal deficit.
Presenting the interim budget recently, finance minister P. Chidambaram said the government would be able to contain the fiscal deficit at 4.6 per cent of the gross domestic product (GDP) in 2013-14, which is below the target of 4.8 per cent of GDP set by the government.
Analysts, however, said the final payout by nationalised banks would depend on how they fared during the fourth quarter. “If the performance continues to be poor, we may find some declaring lower final dividend over the previous year,” an analyst who did not wish to be identified said.
Though the SBI has declared a final dividend of Rs 41.50 per share in the last fiscal, its chairman Arundhati Bhattacharya had recently hinted that asset quality pressures were likely to continue till the economic growth rate revived.