AllBank seeks RBI approval for dividend

Allahabad Bank (AllBank) is unable to dole out a dividend following the recent Reserve Bank of India (RBI) guidelines on bank payouts.

The bank has announced a 179 per cent growth in net profit to Rs 463.38 crore for 2003-04.

As per the new directive, banks need to take prior RBI approval for dividend declaration unless they meet the criteria of a minimum capital adequacy ratio (CAR) of 11 per cent in the preceding two years and in the year in which the dividend is proposed to be declared. Further, their net NPAs to net advances ratio should be under 3 per cent.

"We have made a provision of Rs 78.22 crore for paying dividend in 2003-04, including an interim dividend of 10 per cent that was declared sometimes back, but we could not declare it owing to the new RBI norm. Nevertheless, we are in dialogues with the apex bank, and are hopeful that we will be allowed to reward our shareholders," said chairman O N Singh.

The provision made by the bank suggests that it intends to declare a 10 per cent dividend. In 2002-03, the bank spent Rs 39.11 crore by declaring a 10 per cent dividend.

The bank reported a 2.37 per cent NPA against 5 per cent in the previous year, while the norm requires NPA to be below 3 per cent.

Investment fluctuation reserves reported by the bank was 3 per cent "" the RBI stipulated limit. Its CAR in 2003-04 is around 12.52 per cent, which was 11.15 per cent in the previous year "" well above the limit. The bank could not declare dividend in 2001-02 because its CAR fell short of 11 per cent at 10.62 per cent.

In 2003-04, it declared a 10 per cent interim dividend and spent another Rs 39.11 crore, leaving Rs 39.11 crore for a 10 per cent pay out as final dividend for 2003-04.

Referring to the RBI stipulation of a 11 per cent CAR for the past consecutive three years, Singh said, "We do not understand the motive behind stipulating CAR for the previous two consecutive years."

Public float likely in Oct

Allahabad Bank (AllBank), barely a year after its initial public offer, is all set to approach the capital market with a Rs 100 crore public issue in October for the second time.

"We will approach the market with a second offering in October which will bring down the government's holding in the bank to around 51 per cent," said O N Singh, chairman and managing director, Allahabad Bank.