State-owned banks will give the government a record Rs7,867 crore in dividends this year, an indication of better profitability and capital position, largely driven by the falling stock of non-performing assets (NPAs), Economic Times reported.
Nine out of 12 public sector banks (PSBs) have paid dividends for the fiscal year ended March 2022, led by the country's largest lender, State Bank of India, with Rs3,616 crore followed by Union Bank of India with Rs1,084 crore.
Krishnan Sitaraman, senior director at rating agency Crisil, said the dividend numbers show that PSBs are now back to business as usual after being bowed down by high provisions against rising NPAs since fiscal 2016.
At its peak, the Indian banking system had 11.2% NPAs at the end of March 2017 and those of PSBs were much higher at 15%. Gross NPAs for PSBs have since declined to 7.9% at the end of December 2021.
According to Sitaraman, the decline in NPAs has been fueled by higher credit growth and improved profitability. Crisil expects bank credit growth to improve to 11–12% in fiscal 2023.
"The capital adequacy of all PSBs is now 100 basis points higher than the minimum required; just four years ago, only 20% of PSBs were this comfortable," he said. "This is the best capital position in five years and is now backed by loan growth, which augurs well for these banks."
The higher dividend from PSBs is a minor relief for the government, which is staring at a gap in its balance sheet after the Reserve Bank of India said it will transfer ₹30,307 crore to the government as a surplus, lower than the ₹74,000 crore budgeted.
Meanwhile, Bank credit grew by 10.82 per cent to ₹120.46 lakh crore and deposits by 9.71 per cent to ₹166.95 lakh crore in the fortnight ended May 6, 2022, according to RBI data.
In the fortnight ended May 7, 2021, bank advances stood at ₹108.70 lakh crore and deposits at ₹152.16 lakh crore, according to the RBI's scheduled banks' statement of position in India as of May 6, released on May 19.
Bank advances rose by 10.07 per cent to ₹119.54 lakh crore and deposits by 9.84 per cent to ₹166.24 lakh crore in the previous fortnight ended April 22, 2022.