16 of 22 PSBs skip paying dividends to Government due to mounting NPAs

As many as 16 of 22 public sector banks skipped paying dividends to Government in fiscal 2015-16 due to issue of mounting bad loans.
It has led to a 67% decline in government receipts to Rs. 1,444.6 crore. Only six PSBs have declared dividends, though at a lower rate for the fiscal ended March 2016.
PSBs which skipped dividend payments included Allahabad Bank, Bank of India, Bank of Baroda, Central Bank of India, Canara Bank, Corporation Bank, Punjab National Bank, Dena Bank and Syndicate Bank.
During 2015-16, the highest dividend was paid by State Bank of India (SBI) to the government at Rs. 1,214.6 crore, 22% lower than in the previous fiscal.
Under the existing guidelines

  • Profit-making PSBs have to pay a minimum dividend of 20% of their equity or 20% of their post-tax profit, whichever is higher.
  • The Union Government which is the majority shareholder in all the PSBs has witnessed a 67% decline in dividend receipts from PSU banks at Rs. 1,444.6 crore.

What is the issue?

  • Balance sheets of most of the PSBs have been under stress due to the clean-up exercise targeted at non-performing assets (NPAs).
  • Banks have been given time till March 2017 to clean up their balance sheet. Due to heavy provisioning for bad loans, many banks posted losses in last quarter of the previous fiscal.
  • In 2014-15, the Gross NPAs of the PSU banks had surged from 5.43% (Rs 2.67 lakh crore) to 9.32% (Rs 4.76 lakh crore) in 2015-16 of the total advances.