Improved Profitability Fuels Expectations of Substantial Dividend Payouts for FY24
Public sector banks (PSBs) are anticipated to pay a dividend surpassing Rs 15,000 crore for the financial year ending March 2024, driven by notable improvements in profitability.
Amidst a robust performance in the first three quarters of the current financial year, all 12 PSBs collectively accrued a total profit of Rs 98,000 crore, trailing only Rs 7,000 crore behind the entire fiscal year 2022-23. Notably, PSBs recorded their highest-ever aggregate net profit of Rs 1.05 lakh crore in FY23, marking a substantial increase from Rs 66,539.98 crore in the preceding fiscal year.
The government reaped the benefits of this enhanced profitability, receiving a dividend of Rs 13,804 crore, reflecting a significant 58 percent surge compared to the previous financial year’s payout of Rs 8,718 crore.
Given the anticipated surge in profits for the ongoing financial year, government sources indicate that the dividend payout for FY24 is expected to exceed Rs 15,000 crore, building upon the positive trajectory observed in recent years.
In a bid to streamline dividend declaration processes, the Reserve Bank of India (RBI) unveiled draft guidelines in January, proposing that banks with a net non-performing assets (NPAs) ratio of less than 6 percent be permitted to declare dividends. This represents a reduction from the previous threshold of up to 7 percent as per norms established in 2005.
The proposed guidelines, slated to take effect from FY25 onwards, also outline stringent criteria for banks’ boards to consider when evaluating dividend proposals. These criteria include assessments of NPA classification and provisioning divergences, ensuring prudent risk management practices.
Additionally, commercial banks are mandated to maintain a minimum total capital adequacy of 11.5 percent to qualify for dividend declaration, as per the circular issued by the central bank.
As PSBs continue to exhibit resilience and financial soundness, stakeholders eagerly anticipate the forthcoming dividend declarations, which are poised to further underscore the sector’s robust performance amidst evolving economic landscapes.
