State-run banks received a directive from the union finance ministry to declare a minimum 20 percent of their capital or net profit, whichever is higher, as dividend for 2012-13.
The move by the ministry has not gone down well with these banks, who are already facing strain on their balance sheet owing to the rise in the non performing assets (NPAs).
The finance ministry had shot off the letter seeking dividend after some banks approached it seeking exemption from paying high dividends.
In 2011-12, all state-run banks have reportedly paid a cumulative dividend of Rs 8,550 crore. The banks, on an average, paid about 60 percent of capital and 15 percent of their net profit as dividends, reports indicate.
The union budget 2013-14 accounts for 73 percent more dividend from the Reserve Bank of India, PSU banks, financial institutions and insurance companies in the ongoing fiscal compared to last year.
It expects a dividend income of Rs 44,000 crore and the bulk of it is expected to come from the central bank.