The Reserve Bank of India (RBI) had stopped giving dividend to banks during the financial year 2019-20. The central bank has also limited dividend payments for the financial year 2020-21. This ban has been imposed due to the impact of the second wave of corona virus on the financial health of banks.
The notification issued by the central bank states, “Banks may, if desired, pay the dividend for the financial year ended 31 March 2021, provided it does not exceed 50 per cent of the dividend payout ratio.”
On May 4, 2004, the Reserve Bank came up with the same rules for all banks as dividend payments. In this, certain standards were set for all banks, which can be given a dividend only after fulfilling them.
In order to pay the dividend, the capital adequacy ratio of banks should be more than 9 per cent in the last two financial years, so that they have sufficient capital. Net NPAs of banks should be less than 8 percent. The dividend payout ratio cannot exceed 40 percent in any case.
RBI said on Thursday, “It is very important for banks to stay strong due to the rising volatility of the second wave of corona virus. Taking steps in advance, they should protect the capital and reduce the expected losses.”
On April 21, ET said that in the financial year 2020-21, private banks can also skimp in giving dividends. These banks are ahead in giving dividends. Earlier HDFAC Bank has already made it clear that it will not give dividend this year. The bank could not give dividend even last year.
