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

All the restrictions on dividends have been removed for co-operative banks

RBI-logo-Shutterstock Representational image | Shutterstock

The Reserve Bank on Thursday allowed commercial banks to pay dividends for FY21, subject to certain conditions and limits. The revised circular from the RBI provides that commercial banks can pay up to 50 per cent of what they could pre-COVID.

For co-operative banks, all the restrictions on dividends have been removed.

In the face of the COVID-19 crisis, the RBI had disallowed all the banks from declaring any dividend for FY20, as the focus shifted to conserving capital amid the uncertain environment.

All banks have been advised to be cautious taking into account the adequacy of provisions and economic environment while considering dividend on equity shares, the central bank clarified. "All banks shall continue to meet the applicable minimum regulatory capital requirements after dividend payment," the RBI said in a late evening circular.

While declaring dividend on equity shares, it shall be the responsibility of the Board of Directors to consider the current and projected capital position of the bank vis-a-vis the applicable capital requirements and the adequacy of provisions, taking into account the economic environment and the outlook for profitability, it added.


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