Govt in a fix over bank dividends

The Centre stands to lose a chunk of its non-tax revenues through dividends from public sector banks following recent guidelines issued by the Reserve Bank of India tightening dividend payout.

The finance ministry, as is usual, has directed government nominees on bank boards to seek at least 20 per cent dividend for 2003-04.

In 2003-04, banks and institutions were projected to contribute Rs 940 crore (Rs 9.4 billion) towards the Centre's non-tax revenue. In 2002-03, public sector banks paid the Centre around Rs 800 crore (Rs 8 billion) as dividends.

The RBI last month stipulated that only banks with net non performing assets below 3 per cent and a capital to risk-weighted asset ratio of at least 11

per cent could pay dividends.

Among the nationalised banks, Dena Bank, Indian Bank, Punjab & Sind Bank, Uco Bank and Central Bank of India may find it difficult to comply with the new criteria.

The government had projected receipts of Rs 11,240 crore (Rs 112.4 billion) as dividends from the RBI and nationalised banks and institutions in the revised estimates for 2003-04 against Rs 10,725 crore (Rs 107.25 billion) in the Budget estimates.

Finance ministry officials expressed displeasure over the central bank's move but said the government did not propose to seek a review of the RBI guidelines.