The Government’s coffers could be bolstered in February-March 2014 as public sector banks are likely to declare interim dividend along with the announcement of their third quarter results.
The possibility of paying interim dividend was discussed at a recent meeting of top bankers with Finance Ministry officials.
The Ministry also wants public sector banks to ensure that the dividend payable to the Government in fiscal 2013-14 is not lower than the Rs 6,803-crore paid in 2012-13 (Rs 5,666 crore was paid in 2011-12).
With the fiscal deficit already touching 76 per cent of the full-year target (of Rs 5,42,499 crore) in the first six months of the current financial year, the dividend declared by these banks could, to an extent, help narrow the gap between the Government’s revenue and expenditure.
The Budget for 2013-14 pegged the fiscal deficit for the current year at 4.8 per cent of GDP against 4.9 per cent in the last financial year.
The Reserve Bank of India has cautioned that containing the fiscal deficit in 2013-14 within the budgetary limit could be a challenge for the Government, given the level of gross fiscal deficit in the current financial year so far.
According to an analyst with a brokerage firm, with the Government determined to contain fiscal deficit within the target, banks may front load dividend payment by declaring interim dividend along with their third quarter financial results.
“Possibly, 90 per cent of the dividend payable for the current financial year could be paid in February-March period, with the balance being paid after the declaration of the fourth quarter (January-March) financial results,” he said.
Further, public sector undertakings which do not have any major capital expenditure at hand could also declare interim dividend after the announcement of their third quarter results.
There are 21 public sector banks in the country and the Government owns majority stake in them. According to statute, Government stake in these banks cannot fall below 51 per cent.