RBI allows commercial banks to pay up to 50% of pre-Covid dividends

The Reserve Bank of India (RBI) on Thursday relaxed the dividend payment standards of commercial banks and allowed them to pay up to 50% of what they paid before Covid on profits for the fiscal year ended March 31 2021.

For fiscal 2020, the RBI had asked banks not to pay any dividends on equity shares out of earnings given continued stress and increased uncertainty due to Covid-19. HDFC Bank had decided last week not to pay any dividends on the basis of the RBI directive of the previous year.

“As a partial modification of the instructions, banks may pay dividends on participating shares out of the profits of the financial year ended March 31, 2021, provided that the amount of the dividend does not exceed 50% of the amount determined according to the payment of the dividend. report prescribed in paragraph 4 of the circular of May 4, 2005. The other instructions of the circular will remain unchanged, ”said the RBI.

Co-operative banks are permitted to pay equity share dividends out of profits for the year ended March 31, 2021, in accordance with applicable instructions, the RBI said. However, all banks must continue to meet the applicable minimum regulatory capital requirements after the dividend is paid, he added.

“When declaring dividends on equity shares, it is the responsibility of the board of directors to examine, among other things, the current and projected situation of the bank’s capital with regard to the applicable capital requirements and the adequacy provisions, taking into account the economic environment and profitability prospects, ”said the RBI.

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