UCO Bank gets RBI nod for 8% dividend

The Reserve Bank of India (RBI) on Wednesday permitted UCO Bank to declare an 8 per cent dividend instead of the 10 per cent dividend proposed by the bank.

On an annualised basis, however, the dividend stands at 16 per cent because UCO had approached the primary markets barely six months ago.

Sources said the RBI has cited that a bank cannot pay more than 15 per cent out of its net profit as dividend or 15 per cent of its tier-I capital which ever was less.

With Rs 799 crore as tier-I capital, UCO was directed by RBI to pay an eight per cent dividend because at 10 per cent the outgo of funds would have been greater than 15 per cent of its net profit.

At an eight per cent divided, the payout would be around Rs 65 crore which was around 15 per cent of the net profit of the bank at Rs 435 crore.

UCO Bank could not automatically declare dividends because it failed to meet both capital adequacy and net non-performing asset (NPAs) specifications.

While its net NPA was greater than three per cent "" the threshold limit for declaring dividend "" its capital adequacy was also less than 11 per cent. This required the bank to seek RBI's approval for declaring dividends.

The bank today increased interest payable on NRE deposits of one-two years from 1.8 per cent to 2.1 per cent. For two years and above, the rate would be 2.6 per cent.