Banks may urge RBI to ease payout norms

Public sector commercial banks will shortly make a joint representation to the Reserve Bank of India (RBI) through the Indian Bankers' Association (IBA) for making the dividend payout norm a little lenient.

They will also request the central bank to provide them more time for abiding by the new norm of having a less than 3 per cent net non-performing assets (NPAs) for paying dividend. Most of the banks, however, do not have any problem with the 11 per cent capital adequacy ratio.

Sources in public sector banks said that majority of them will find it a little difficult to abide by the 3 per cent norm because they will also have to introduce the 90-day NPA norm making things difficult for them.

Sources in the banking sector said, "The chairmen of respective banks also have been interacting with the RBI for allowing them to pay out dividend. Listed banks were more eager to pay dividend for the benefit of shareholders."

M S Kapur, chairman of Allahabad Bank, said, "We have initiated talks with the Reserve Bank for allowing us to declare dividends." The chairman of IBA, however, could not be contacted.

According to NPA levels based on last year, only four banks were favourably placed to pay dividend. The rest will have to seek RBI's permission to reward their shareholders.

Bankers were in fact asking for more time to allow them to abide by the regulation or increase the upper limit for NPA by at least another 100 or 200 basis point to four or five.

"The announcement from RBI has come as a blow to bankers. The apex bank should have provided us more time before making the announcement," the source said.