The Reserve Bank of India (RBI) on April 22 said commercial banks can pay up to 50 percent of what they could pre-COVID on equity shares from the profits for the financial year ended March 31, 2021.
For FY20, the RBI had asked banks not to make any dividend payment on equity shares from the profits in view of the ongoing stress and heightened uncertainty on account of COVID-19. This was asked to make sure banks continue to conserve capital to support the economy and absorb losses.
This rule has been relaxed for FY21.
"In partial modification of the instructions contained in circular DBOD.NO.BP.BC.88/21.02.067/2004-05 dated May 4, 2005, banks may pay dividend on equity shares from the profits for the financial year ended March 31, 2021, subject to the quantum of dividend being not more than fifty percent of the amount determined as per the dividend payout ratio prescribed in paragraph 4 of the said circular. Other instructions in the circular dated May 4, 2005 shall remain unchanged," the RBI said.
Also, cooperative banks are permitted to pay dividend on equity shares from the profits of the financial year ended March 31, 2021, as per the extant instructions, the RBI said.
However, all banks must continue to meet the applicable minimum regulatory capital requirements after dividend payment, the RBI said.
"While declaring dividend on equity shares, it shall be the responsibility of the Board of Directors to inter-alia consider the current and projected capital position of the bank vis-à-vis the applicable capital requirements and the adequacy of provisions, taking into account the economic environment and the outlook for profitability," the RBI said.
Source:moneycontrol.com