Questions : RBI has recenlty relaxed the dividend payout norms of commercial banks and allowed them to pay up to XYZ of what they paid before Covid from the profits for the fiscal ended March 31, 2021. What is the value of XYZ ?
(a) 50 percent
(b) 55 percent
(c) 60 percent
(d) 65 percent
Ans.(a)
Related facts
- RBI has recenlty relaxed the dividend payout norms of commercial banks and allowed them to pay up to 50 percent of what they paid before Covid from the profits for the fiscal ended March 31, 2021.
- For FY20, the RBI had asked banks not to make any dividend payment on equity shares from the profits.
- Background
- This decision has been taken in view of the ongoing stress and heightened uncertainty on account of Covid-19.
- It is notable that HDFC Bank had last week decided not to pay any dividend on the basis of the previous year’s RBI directive.
- RBI statement
- “In partial modification of the instructions, banks may pay dividend on equity shares from the profits for the financial year ended March 31, 2021, subject to the quantum of dividend being not more than 50 per cent of the amount determined as per the dividend payout ratio prescribed in paragraph 4 of the May 4, 2005 circular. Whereas Cooperative banks are permitted to pay dividend on equity shares from the profits of the financial year ended March 31, 2021. Other instructions in the circular shall remain unchanged,” the RBI said.
- However, all banks must continue to meet the applicable minimum regulatory capital requirements after dividend payment, it added.
- While declaring dividend on equity shares, it shall be the responsibility of the board of directors to inter-alia consider the current and projected capital position of the bank vis-à-vis the applicable capital requirements and the adequacy of provisions.
By — Pankaj Pandey.