The Reserve Bank of India curbed banks' dividend paying ability in the financial year 2020-21 citing ongoing second wave of coronavirus that comes with an economic cost.
"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," the central bank said in a notification.
Way back on May 04, 2004 the Reserve Bank had come out with standardized norms for dividend declaration.
A bank should have at least 9 percent capital adequacy ratio, a capital maintenance gauge, for preceding two completed years and the accounting year for which it proposes to declare dividend.
The net non-performing ratio should be less than 7 percent.
The dividend payout ratio shall not exceed 40 % and shall be as per a mandated matrix.
"In view of the continuing uncertainty caused by the ongoing second wave of COVID-19 in the country, it is crucial that banks remain resilient and proactively raise and conserve capital as a bulwark against unexpected losses," RBI said on Thursday.
On April 21, ET wrote that private banks, known for rewarding investors, were unlikely pay dividend in FY21 amid the localized restrictions on mobility. HDFC Bank NSE 0.63 %, largest by market capital, did not declare dividend.
RBI did not permit banks to pay any dividends in 2019-20 too. In April last year, it barred banks from announcing any such rewards amid an outbreak of the pandemic.
Source:economictimes.indiatimes.com