G. Rama Moorthy Chairman of TESCUBFED and NAFCUB Director has written to the RBI governor requesting him to reconsider the restriction on Payment of dividend by urban cooperative banks.
The RBI’s decision that all banks shall not make any further dividend payment from the profits pertaining to the financial year ended March 31, 2020 has upset all shareholders of cooperative urban banks, Rama Moorthy says in his letter, says a press release.
The apex bank’s decision is said to be the environment heightened uncertainty caused by COVID-19 and it is important that banks conserve capital to retain their capacity to support the economy and absorb losses.
But the Reserve Bank’s decision is not palatable to the shareholders (members) of the urban cooperative banks and they demand that the dividend should be paid to them as usual annually. The agitated shareholder members may insist in the annual general meeting that the dividend should be declared and paid as usual. This may affect the conduct of AGMs.
Moorthy, a senior co-operator has called upon the apex bank to consider a few parameters like percentage of Non-Performing Assets, profit earned for last two previous consequent years etc to decide the soundness of a bank but he would like the depositors, shareholder members and general public appraise the soundness of a urban cooperative bank on parameters like regularly payment of interest to depositors, payment of salaries to the employees and payment of dividend to the shareholder members.
Arguing since most of the urban cooperative banks have the elderly and retired people as their shareholder members the RBI’s decision will affect them, Moothy says.
Underlining the fact that since Urban Cooperative banks are not listed in the market, their retained profits do not influence the value of the shares in the books. On the other hand, the commercial banks are listed and their retained profit would aggrandize the value of such shares, Moorthy notes.
Discussing several other disadvantages in his letter the apex bank’s decision may inflict on urban cooperative banks, Moorthy urged RBI to reconsider the earlier decision and permit the urban cooperative banks to distribute the dividend as usual for the year 2019-20 after approval in the annual meetings of the respective banks.