Bank dividend payments suspended

Mumbai: Providing relaxation to lenders, the Reserve Bank of India on Friday said that banks shall be exempted from making dividend payment in the light of financial difficulties posed by Covid-19 pandemic.

The Reserve Bank debarred all commercial and cooperative banks from paying dividends to shareholders and promoter groups as the regulator fears the Covid-driven economic shocks would continue longer and may put the health of the financial system at risk.

"In this regard in view of the Covid-19-related economic shocks, commercial banks and cooperative banks shall not make any further dividend payouts from the profit pertaining to FY20 until further instructions," RBI Governor Shaktikanta Das said.

Making a slew of announcement to ease the pressure on financial sector, RBI Governor Shaktikanta Das said that the 90-day norm will not apply on moratorium granted on existing loans by banks.

"This restriction shall be reviewed on the basis of the financial position of banks as of the September 2020 quarter," he added.

Avnish Jain of Canara Robeco AMC said "stopping dividend payments from banks would be impact government's non-tax revenue, further worsening the already stressed fiscal situation."

While most private sector banks pay only very low dividends, state-run banks have to make hefty payouts to the government annually. In fact, since 2018 the government has made it mandatory for all its profit making companies to pay at least 20 percent of their net income as dividend.

Budget 2020 has shifted the dividend distribution tax from the hands of the company to the