As fiscal deficit target in India turns hard-to-handle, govt orders banks to pay interim dividend

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Finance Ministry has indicated that all banks should pay dividend, depending on strength of their balance sheets. Express Finance Ministry has indicated that all banks should pay dividend, depending on strength of their balance sheets. Express
SummaryCornered by fiscal deficit problem, govt flexes muscles to force banks into making dividend payouts.

Hard pressed to meet the fiscal deficit target, the government has asked state-owned banks to pay interim dividend to help it mop up resources.

Interim dividend payouts will help the government raise funds as the majority shareholder in public sector banks.

The Finance Ministry has indicated that all state-owned banks should pay dividend, depending on the strength of their balance sheets, sources said.

Union Bank of India today declared an interim dividend of 27 per cent, or Rs 2.70 per share, for the current financial year.

Other public sector banks have lined up board meetings this week and the next to declare interim dividend.

Oriental Bank of Commerce and Allahabad Bank will hold board meetings on January 11 to consider interim dividend.

Board meetings have been scheduled by Chennai-based Indian Bank on January 10 and IDBI Bank and Indian Overseas Bank on January 13 to decide on interim dividend.

In the previous financial year, 21 public sector banks paid a combined dividend of Rs 6,803.63 crore.

Finance Minister P Chidambaram held a meeting with select PSU chiefs yesterday to discuss their capital expenditure plans and explore the possibility of getting higher dividend from them.

In the 2013-14 budget, the government has estimated garnering Rs 29,870 crore as dividend from PSUs. An additional Rs 43,996 crore is estimated to flow in from PSU banks and the Reserve Bank of India under the same head.

In 2012-13, the government had initially budgeted dividend income of Rs 27,178 crore. This went up to Rs 29,996 crore in the revised estimates as companies paid higher dividend on demand from the Finance Ministry.

The government is banking on a dividend mop-up to keep its fiscal budget on track. With lower non-tax revenue, the fiscal deficit has already touched 94 per cent of the budget estimates in the April-November period.

The target for the fiscal deficit has been set at 4.8 per cent of GDP in the current financial year.

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