Govt will receive 30% more dividend from public sector banks in FY24

A back-of-the-envelope calculation shows that PSBs will pay dividends aggregating ₹18,013 crore to the government in FY24 against ₹13,804 crore in the preceding financial year. This calculation does not take into account the 15 per cent dividend distribution tax as the same also goes to the government.

Out of 12 PSBs, 10 have declared dividends.

The top four PSBs to pay rich dividends (relative to face value) in FY24 are – State Bank of India (SBI), Bank of Baroda (BoB), Canara Bank and Indian Bank. Central Bank of India and Indian Overseas Bank did not declare dividend.

SBI has declared the highest dividend (relative to face value) among all PSBs at ₹13.70 per equity share (1370 per cent on equity share of Re 1 face value) in FY24 against ₹11.3 in FY23.

India’s largest bank alone accounts for about 39 per cent of the total PSB dividend to be paid to the government in FY24.

BoB’s dividend at ₹7.60 per equity share (380 per cent on face value ₹2) is the second highest among PSBs, accounting for about 14 per cent of the total dividend the government will receive from these banks. It paid a dividend of ₹5.50 per share in FY3.

Canara Bank has declared the third highest dividend among PSBs (accounting for about 10 per cent of the total dividend the government will receive from these banks) at ₹16.10 per equity share (that is 161 per cent) of face value of ₹10 for FY24 against ₹12 in FY23.

The Bank’s equity shares have been split (record date was May 15, 2024) such that one equity share having a face value of ₹10 has been sub-divided into five equity shares of ₹2 face value.

Indian Bank’s Board has recommended a dividend of ₹12 per equity share (120 per cent), which is the fourth highest among PSBs, for FY24 against ₹8.60 in FY23. It will account for about 7 per cent of the total dividend PSBs will be paying to the government.

ICRA, in a note last month, revised the banking sector outlook to “Stable” from “Positive” on the expectation of moderation in credit growth and profitability metrics, though the same would continue to remain healthy.