Govt find itself faced with a money puzzle it had not bargained for

North Block has another bit of money puzzle to solve this year: Plugging the revenue gap arising from paltry dividends at the banks it owns. As India battles a potentially $165-billion bad-loan resolution, its 21 state-run banks are struggling to survive, let alone pay part of their profits to the government. Just two lenders – Indian Bank and Vijaya – could pay dividends totaling Rs 444 crore to the government, shining the spotlight on the health of the banking industry that is putting in unprecedented amounts of capital to cover loans that have gone bad. Dividend payouts for FY18 would be the worst by Indian state-run banks since FY09, when the economy was seeking to clamber out of the subprime sinkhole. The payouts have fallen progressively since FY15, when banks led by the State Bank of India had paid the government Rs 6,940 crore in dividends.“With consecutive years of losses, the free reserves of many public sector banks have turned negative,” said Karthik Srinivasan, senior vice president at ICRA. “Thus, future dividend payouts over next few years could also remain limited. Many banks are currently weak on capital ratios, and they need to conserve their earnings in case they are not meeting capital conservation buffers (CCBs).” 64706375

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