In FY08 also, the dividend payment of 34 banks increased by 31%. But, the private banks dividend payment rate was higher than public sector banks (PSBs). And in the case of dividend- payout ratio, private sector banks showed an increase as against a decline for PSBs in 2007-08 from the level of 2006-07.
A comparison between 12 private sector banks operating in the country and 22 public sector banks shows this.
The Reserve Bank of India (RBI) has raised the cap on banks? dividend-payout ratio from 33.33-40%. In the case of private sector banks, dividend to net profit ratio at the aggregate level showed an increase during 2007-08, against that of 2006-07, and in the case of public sector banks, dividend to net profit ratio decreased. But the ratio was higher in private sector banks compared to PSBs during both the time period.
The aggregate total net profit of 12 private sector banks have increased by 39.5% from Rs 6,189 crore in 2006-07 to Rs 8,633 crore in 2007-08. Their total equity dividend has increased by 39.6% during the study period, increasing the equity dividend to net profit ratio from 23.64% in 2006-07 to 23.66% in 2007-08.One interesting thing is that no private sector banks exceeded the RBI norm of ratio.
On the other hand, the total dividend payment of 22 PSBs increased by 27.44% to Rs 4,522 crore during FY08 from the level of Rs 3,548 crore during FY07. The aggregate total net profit of 22 PSBs have increased by 32.67% from Rs 18,696 crore in 2006-07 to Rs 24,804 crore in FY08. And the equity dividend to net profit ratio decreased from 18.98% to 18.23% during the study period. All the 22 PSBs dividend-payout ratio are below the RBI norm.
On the basis of the average rate of equity dividend (annualised equity dividend as percentage of paid-up equity capital), the top five in 2007-08 are State Bank of Hyderabad, State Bank of India Punjab National Bank (PNB), Corporation Bank and State Bank of Mysore .
Among the 22 dividend paying PSBs for FY08 and FY07, 12 raised the rates of dividend , one reduced and nine maintained the same level. Among the 22 public sector banks, those who raised their dividend payment significantly during FY08 are SBI (84.3%), IDBI Bank (33.41%) and Bank Of Baroda (33.33%).