RBI issues new instructions to banks to tide over Covid 19 wave—orders this to conserve capital

The Reserve Bank of India RBI has issued a notification to banks and directed them to adhere to it in order to tide over the Covid 19 second wave. In the notification, it has instructed banks to remain resilient and proactively raise and conserve capital as a bulwark against unexpected losses.  

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With the aim to help banks conserve capital, the Reserve Bank of India (RBI) has directed the banks to restrict dividend payouts to 50 per cent, said IANS report.  

In a notification to all the commercial and co-operative banks, RBI said that in view of the continuing uncertainty caused by the ongoing second wave of Covid-19 in the country, it is crucial that banks remain resilient and proactively raise and conserve capital as a bulwark against unexpected losses.  

"Therefore, while allowing banks to pay dividend on equity shares, it has been decided to review the dividend declaration norms for the year ended March 31, 2021," it said.  

Banks may pay dividend on equity shares from the profits for the financial year ended March 31, 2021, subject to the quantum of dividend being not more than fifty percent of the amount determined as per the dividend payout ratio.  

"Cooperative banks shall be permitted to pay dividend on equity shares from the profits of the financial year ended March 31, 2021 as per the extant instructions," it said.  

RBI added that all banks shall continue to meet the applicable minimum regulatory capital requirements after dividend payment.  

While declaring dividend on equity shares, it shall be the responsibility of the Board of Directors to inter-alia consider the current and projected capital position of the bank vis-a-vis the applicable capital requirements and the adequacy of provisions, taking into account the economic environment and the outlook for profitability, it added.