The government is set to earn equity dividend of around Rs 13,800 crore from 12 listed public sector banks (PSB’s) in FY23, up 50 per cent from Rs 9,210 crore in FY22. This will be the highest ever dividend income from PSBs to the government.
The total equity dividend of 12 listed PSBs in FY23 is around Rs 21,000 crore, up 53 per cent from Rs 13,710 crore in FY22. This has been the best year for PSBs in terms of earnings and dividend payouts.
SBI has the highest stake
The growth in dividend payout among individual PSBs was driven by the State Bank of India (SBI), which declared a total payout of Rs 10,085 crore for FY23, of which Rs 5,740 crore is being received by the government. SBI accounted for 48 per cent of all dividends paid by PSBs in FY23.
It was followed by Bank of Baroda, which declared equity dividend of Rs 2,848 crore in FY23 and Canara Bank (Rs 2,177 crore).
This increase in dividend payout by PSBs was driven by a sharp jump in revenue and net profit of PSBs in the last two years. The combined net profit of listed PSBs rose to a record high of Rs 1.05 lakh crore in FY23 from Rs 66,540 crore in FY22 and Rs 31,818 crore in FY21.
In comparison, PSBs at the peak of the bad loan crisis in the banking sector reported a combined net loss of over Rs 76,000 crore in FY18, followed by a net loss of around Rs 59,800 crore in FY19 .
In comparison, the combined gross interest income of PSBs grew by 20 per cent to Rs 8.51 lakh crore in FY23 from Rs 7.09 lakh crore a year ago.
Their total revenue, including fee and treasury income, grew by 15.7 per cent over the previous year to Rs 9.7 lakh crore during the same period. This increase in PSB revenues in FY23 was fueled by an increase in lending rates and an improvement in credit growth over the previous FY.
In terms of earnings, PSBs also benefited from a sharp decline in contingency expenditure and provisions for non-performing loans (NPAs). The total provisioning for NPAs in FY23 declined by 9.7 per cent over the previous year to around Rs 97,000 crore, the lowest in the last eight years.
A sharp increase in dividend payments by PSBs will provide a fiscal stimulus to the central government and help reduce the fiscal deficit. Dividend income from PSBs forms part of the non-tax revenue of the government.