PSBs to decide on interim dividend soon

Banks line up board meetings over two weeks

With the government of India going into overdrive to raise resources to meet fiscal deficit targets, public sector banks (PSBs) are lining up board meetings to take a call on interim dividend for the current financial year.

Financial Services Secretary in the finance ministry Rajiv Takru told Business Standard bank managements would finalise the matter in the next two weeks.

Meanwhile, Union Bank of India has informed the BSE it had declared an interim dividend of 27 per cent (Rs 2.70 per share) for 2013-14.

The boards of Delhi-based Oriental Bank of Commerce and Kolkata-based Allahabad Bank will meet on Saturday.  to decide on dividend. IDBI Bank will take a decision at its board meeting on January 13.

  A senior PSB executive said his bank had received a one-line communication from the finance ministry, indicating how much interim dividend was expected from the bank. The ministry had taken into account performance in the last two quarters of 2013-14 and dividend payout in last three financial years, executive added.

State-run banks’ profitability has come under severe pressure due to rise in stressed assets — non-performing ones  and restructured loans.  While income growth has declined, reflecting stretched economic slowdown and credit demand, the burden for provisioning has been going up each quarter for the last few quarters.

Two PSBs — Central Bank of India and United Bank of India — had declared a net loss in the second quarter due to high provisions.

Asked if the two banks would also pay a dividend, Takru said the decision would depend on the strength of their balance sheets.

CRISIL Research said PSBs’ income was expected to grow at a subdued pace of 9-10 per cent (year-on-year) as compared to 12 per cent in the third quarter of FY13. The slower growth in interest income is a result of tepid growth in advances.

The performance would be impacted by weak credit growth, rising proportion of non-earning assets and continuing pressure on net interest margins (NIMs). NIMs are expected to decline by 10-15 basis points, CRISIL added.