Government expects Rs 15,000 crore in dividends from state-run banks: Report

Rising profits at state-run banks are expected to result in dividends totalling nearly Rs 14,950 crore for the government in the upcoming fiscal year beginning April, marking a major increase from the current year, a senior official from the finance ministry told news agency Reuters.

Prime Minister Narendra Modi's administration has implemented various measures since 2014 to bolster state banks, including merging weaker entities with stronger ones and enacting a bankruptcy law to recover funds from defaulters. Additionally, over Rs 3.3 lakh crore has been injected into stressed banks to recapitalise them.

Financial Services Secretary Vivek Joshi stated that the government foresees dividends from state banks amounting to at least Rs 15,000 crore in FY 2024-25, reflecting an anticipated 8.7 per cent increase from the expected Rs 13,800 crore in the ongoing fiscal year ending in March.

Joshi described this estimate as conservative, noting that the net profits of state banks, including the State Bank of India, are projected to exceed Rs 1 lakh crore in the current fiscal year, driven by robust credit demand.

In the first three quarters ending in December, the 12 state-run banks collectively reported net profits totalling Rs 98,000 crore, Joshi said, highlighting the significant improvement in their asset quality over the years.

According to data from the central bank, gross non-performing assets (GNPAs) of state banks have decreased from 9.6 per cent in March 2017 quarter to 3.2 per cent in September 2023.

Finance Minister Nirmala Sitharaman estimated that the government would receive Rs 1.02 lakh crore in dividends from the Reserve Bank of India, state banks and financial institutions in FY 2024-25, slightly lower than Rs 1.04 lakh crore anticipated in the current financial year.

Majority of dividends typically come from the central bank, with the RBI transferring Rs 87,416 crore to the government in the current fiscal year.

Joshi noted that state banks have raised Rs 43,000 crore through markets so far in the current fiscal year, indicating reduced reliance on budgetary support compared to previous years.

(With Reuters inputs)