Govt asks IOB, Allahabad Bank to shell out higher dividend for '08

The government has asked at least two public sector banks "� Indian Overseas Bank and Allahabad Bank "� to shell out higher dividend for 2007-08.

In a statement to the BSE this afternoon, Allahabad Bank said that its board will consider revising the dividend for 2007-08. A few hours later it updated it by saying that dividend payment has been increased to 35 per cent, instead of 30 per cent declared earlier. It further added that the annual accounts were accordingly being revised.

While Allahabad Bank did not comment on the reason for the review, Indian Overseas Bank was more candid in its exchange filing and said, "Upon a proposal for reconsideration of dividend received by the bank from the government, a meeting of the board is being convened on June 13."

The Indian Overseas Bank board was huddled in a meeting till late in the evening to reconsider the audited results for the year-ended March 31 and also recommend a fresh dividend instead of the earlier recommendation of 32 per cent.

When contacted, Arun Ramanathan, Union financial Sector secretary, said, "I cannot speak on the matter since I do not have the papers with me."

Allahabad Bank CMD AC Mahajan did not comment on the issue saying he was in a meeting. Indian Overseas Bank CMD S A Bhatt said he would comment only after the board meeting.

The government insists that banks either pay 20 per cent of their paid-up capital or 20 per cent of net profit, whichever is higher, as dividend. Government nominees on bank boards, who are usually finance ministry officials, are mandated to ensure that the minimum amount is paid.

This is the second time in the last few years that the government has stepped in to seek higher dividend.

Following a similar demand from banks a couple of years ago, the Reserve Bank of India had issued instructions about dividends to be paid by banks. The regulator had linked dividend payout to capital adequacy levels.