State-owned banks have urged the government to lower their dividend for this financial year as they are looking to shore up their capital, according to people familiar with the development. The government expects banks to pay dividends on the lines of central public sector enterprises, which pay 30% of the profit after tax or 5% of net worth, whichever is higher. Two bank executives aware of the developments said banks have sought relief on the quantum of payout. One banker said that further discussions were on with the government after being discussed at a February-end meeting between bank representatives and government officials. According to another banker who did not wish to be identified, it is important that banks have extra capital to absorb any systemic shocks due to the current stress in the global banking sector. In 2019 -- 20 the Reserve Bank of India RBI did not allow banks to pay dividends due to the Pandemic. The dividend can be paid on equity shares from the profits for 2020 -- 21, subject to the quantum of the dividend being less than 50% of the amount determined as per the dividend payout ratio. The government has pegged 40,953 crore as a dividend from the RBI and public sector financial institutions, down from the previously budgeted 73,498 crore. Any relief on this count could have an impact on the Centre's fiscal deficit for 2022 -- 23 and pegged at 6.4% of GDP, with disinvestment receipts already under pressure. The PSB's profit is expected to be worth around 1 lakh crore by the end of the fiscal, up from 66,539 crore last year. Some banks argue that banks should have a buffer capital of at least 2% above the minimum capital to risk-weighted assets CRAR, which is around 11.5% after including capital conservation buffer CCB said. Under the baseline scenario, the aggregate CRAR of 46 major banks is projected to drop to 14.9% by September 2023 from 15.8% in September 2022, according to the RBI's projections. In December 2022, the country's largest bank, State Bank of India, had a capital adequacy ratio of 13.27%. In December, the lender posted its highest net profit of 14,205 crore. According to one person, the bank board decides on the dividend according to the existing guidelines of the RBI, as the majority stakeholder, the government may have some expectations, given that all banks have record profits, according to the existing regulations.