Expected loss model: PSBs may seek pause on paying govt dividends

Sitaraman said banks' provisioning cover ratio was close to 75 per cent - the highest in about the last 25 years

Public sector banks (PSBs) are considering asking the government to allow them to not pay it a dividend as they look to conserve capital before the expected loss-based approach for loan loss provisioning kicks in, likely from April 1, 2025.

In January, the Reserve Bank of India (RBI) released a discussion paper on the expected loss-based approach for loan loss provisioning. Last week, the government asked public sector banks to conduct a detailed study on the impact of such a norm on their capital position.

At present, banks make provisions on incurred loss, that is, once an account is overdue for more