Nine out of 12 public sector banks (PSBs) have paid dividends for the fiscal year ended March 2022, led by the country’s largest lender
() with Rs3,616 crore followed by (UBI) with Rs1,084 crore.
This is a big improvement from FY21 when only SBI and
gave any dividend to the government.
Krishnan Sitaraman, senior director at rating agency
, said the dividend numbers show that PSBs are now back to business as usual after being bowed down by high provisions against rising NPAs since fiscal 2016.
“The capital adequacy of all PSBs is now 100 basis points higher than the minimum required; just four years ago, only 20% of PSBs were this comfortable,” he said. “This is the best capital position in five years and is now backed by loan growth, which augurs well for these banks.”
Improved recoveries, which led to falling provisions and lower NPAs, have been key reasons for the PSB recovery.
At its peak, the Indian banking system had 11.2% NPAs at the end of March 2017 and those of PSBs were much higher at 15%. Gross NPAs for PSBs have since declined to 7.9% at the end of December 2021.
Sitaraman said the fall in NPAs has been backed by higher credit growth, improving profitability. Crisil expects bank credit growth to improve to 11-12% in fiscal 2023 from 9.6% in fiscal 2022 and 5% in fiscal 2021.
The higher dividend from PSBs is a minor relief for the government, which is staring at a gap in its balance sheet after the Reserve Bank of India said it will transfer Rs30,307 crore to the government as surplus, lower than the Rs74,000 crore budgeted.
Expectations are that PSBs will continue to pay dividends to the government as business prospects improve. Consistent dividend payments will also improve these banks’ prospects before investors.
“PSBs now have a good capital cushion and can now say have turned around,” said Karthik Srinivasan, group head, financial sector ratings, at rating agency
. “It is fair to assume they will remain profitable in the short term and continue offering dividends.”
Among the banks that have not announced dividends are
, Central and , which are all profitable at the end of March 2022. Regulations prevent them from declaring dividends because either their accumulated losses are high, their reserves are negative, or they are under RBI restrictions.
