will be much lower than what the government had originally budgeted for. Against dividend payments of Rs 10,433 crore from banks, financial institutions and insurers in the budget estimates for 2015-16, the government has more than halved its projections to under Rs 5,100 crore in the revised estimates. Next fiscal, it expects a pickup with payout from these entities estimated to rise nearly 37% to Rs 6,974 crore.
Of this nearly a third or Rs 2,215 crore will come from LIC, followed by State Bank of India (Rs 1,143 crore) and Bank of Baroda (Rs 501 crore).
The next fiscal will be the second year in a row when nine banks would not be making an annual payout to its shareholders, led by the government. This year, over 32 government-owned banks, FIs and insurance companies are not going to pay dividends. All these entities, barring IIFCL and Bharatiya Mahila Bank, were budgeted to give hefty dividends during the current fiscal. The next fiscal will be the second year in a row when nine banks would not be making an annual payout to its shareholders, led by the government. This year, more than half of the PSBs, FIs and insurance companies are not going to pay dividends. All these entities, barring IIFCL and Bharatiya Mahila Bank, were budgeted to shell out hefty dividends during the current fiscal.
RBI's insistence on classifying several loans, where repayments have been irregular, has forced many PSBs including Bank of Baroda, Bank of India, IDBI Bank, Indian Overseas Bank and Oriental Bank of Commerce into losses. Others such as SBI and PNB have reported a sharp fall in profits as they set aside funds to cover for potential non-payment from several companies.
Analysts have argued that the government should seek lower dividends so that those earning profits can plough back a part of the funds to meet the capital requirements.
The rise in bad debt and regulatory requirements has forced the government to infuse more equity to public sector banks as the Centre has committed to maintain majority stake in these entities.
The amount of bad loans of public sector banks have increased by nearly Rs.1 lakh crore during the first nine months of the current fiscal, Finance Minister Arun Jaitley recently said. “The gross Non Performing Assets (NPAs) of the PSBs increased from 5.43 per cent as on March 2015 to 7.30 per cent as on December 2015,” he told Rajya Sabha. Gross NPAs of PSBs increased from Rs. 2,67,065 lakh crore in March 2015 to Rs. 3,61,731 lakh crore in December 2015. Thus, there is an increase of Rs. 94,666 crore over the nine months of the current fiscal 2015-16. He also said the government has taken specific measures to address issues in sectors such as infrastructure, steel and textiles incidence of NPAs is high.