In a relief to shareholders, including the government, the Reserve Bank of India (RBI) has allowed commercial banks to pay dividends of up to 50 per cent of what they could do in pre-Covid years.

In December last year, in view of the pandemic, the central bank had said that lenders should continue to conserve capital to support the economy and absorb losses. It had then said that banks should not make any dividend payment on equity shares from the profits pertaining to the financial year ended March 31, 2020.

Last week, HDFC Bank did not pay any dividend to its shareholders. The country’s largest private sector bank said this was due to the second wave of the pandemic.

However, the bank said its board will re-assess the position based on any further guidelines from the RBI in this regard.

In a late evening circular issued on Thursday, the RBI allowed commercial banks to pay dividends for 2020-21, subject to certain conditions.

The revised circular from the RBI provides that commercial banks can pay up to 50 per cent of what they could in pre-Covid years.

For co-operative banks, all restrictions on dividends have been removed.

However, the banking regulator clarified that all the lenders have been advised to be cautious, taking into account the adequacy of provisions and economic environment while considering dividend on equity shares.