RBI: New Dividend Payout norms for NBFCs
Reserve Bank of India (RBI) has decided to prescribe guidelines on distribution of dividend by NBFCs in order to induce a greater transparency and uniformity in practice.
Highlights
- Guidelines will be effective for the declaration of dividend from profit for financial year 2021-2022 and onwards.
- Board of directors will consider the proposals for dividend.
- They will take into account the supervisory findings of Reserve Bank (National Housing Bank for HFCs) on divergence in classification and provisioning of non-performing assets (NPAs).
- Board will also ensure that total dividend proposed for financial year does not exceed ceilings as specified in these guidelines.
- As per circular, RBI will not entertain any request for ad-hoc dispensation on declaration of dividend.
How can NBFCs comply with guidelines?
- As per guidelines, NBFCs will need to comply with minimum prudential requirements to be eligible to announce dividend.
- One of the eligibility criteria is, net NPA ratio should be less than 6% in each of last three years as well as at the close of financial year for which dividend is being proposed.
- For NBFCs, that do not accept public funds & do not have any customer interface, no specific ceilings on dividend payout have been set.
- Maximum dividend payout ratio for core investment companies has been set at 60%, standalone primary dealers at 60% and for other NBFCs at 50%.
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Month: Current Affairs - June, 2021