Dividend Payouts – ePayment Mode

  

 Dividend Payouts – ePayment Mode

During the last couple of months, Companies have been declaring Dividends and remitting the same, to their shareholders.

In India, the chief modes of Dividend Remittance is through

01) Paper Based i.e Cheques

02) ePayments i.e Electronic Clearing Service(ECS)/ National Electronic Clearing Service(NECS).       Apart from the above two ePayment Options, the third emerging trend is NEFTmode.

 /20ratio between Paper bases and rough

 shareholders.

It is observed that the ratio between Paper based and ePayment based transactions is  80/20.

To increase the ratio of ePayments over Paper Based, both the Companies and shareholders, should work together. However, as the benefits of ePayments are more to the companies, the companies should take the lead.

E – Dividend

This is an automated system of dividend payment into investors account through electronic device without physical cheques. Though an emerging concept in the domestic capital market, it offers several advantages over the usual cumbersome printing and posting of paper based dividend warrants. E-dividend comes with a lot of attendant benefits;

01) There is increased transparency in the administration of dividend payment.

02) Eliminates the cost and stress associated with printing and posting of dividend warrants thereby reducing total cost of dividend processing.

03) Faster and more secured dividend payment delivery.

04) Reduces incidents of unclaimed dividends.

05) More investors will be attracted into the capital market.

06) Happier investors as dividends are received conveniently and promptly.

07) 24 hour processing which gives next day value to the investor.

The following enquires related to Paper-Based Dividends can be minimized:-

1.    Stale Dividend Warrant requiring revalidation.

2.    Returned unclaimed warrants.

3.    Non-Receipt of dividend after six month.

4.    Non-Receipt of a particular Dividend Payment.

5.    Loss/Missing Dividend Warrant.

6.    Short or over-payment of dividend warrants.

7.    Mutilated warrant or partly torn warrant, or warrant with wrong spelling of name and omission of        shareholders title.

However, Companies should have a robust investor grievance cell, to respond to

1    Enquiries in respect of paid dividend warrants.

2.    Enquiries on E – dividend.

As a first step, Banks should distribute their Dividend only in ePayment Mode.