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RBI released New Dividend Payment Norms for NBFCs

Published on June 26, 2021
Current Context: The Reserve Bank of India issued guidelines on the distribution of dividends by Non-Banking Financial Companies (NBFCs).
RBI released New Dividend Payment Norms for NBFCs
  • The guidelines for the same were issued to have transparency and uniformity in the practice.
  • The guidelines will be effective for the declaration of dividend from the profits of the financial year ending March 31, 2022, and onwards.
  • The guidelines will be applicable to all the NBFCs which are under RBI.
  • As per the minimum prudential requirements prescribed for declaration of dividend, the net NPA ratio of the NBFC concerned will be less than 6% in each of the last three years, including as at the close of the financial year for which the dividend is proposed to be declared.
  • The NBFC should fulfil the regulatory capital requirement for each of the last three financial years, including the financial year for which the dividend is proposed.
  • For the core investment company which supposes an NBFC, the maximum dividend payout ratio will be 60%. It will be 50% for other NBFCs. The dividend payout ratio is the ratio between the amount of the dividend payable in a year and the net profit as per the audited financial statements.
  • And the proposed dividend will be the inclusion of both dividend on equity shares and compulsorily convertible preference shares eligible for inclusion in Tier 1 capital.
  • The NBFCs are supposed to give a detailed report for dividend declared during the financial year to the RBI.
  • Static Part:
    • HQ of RBI: Mumbai
    • Governor of RBI: Shaktikanta Das
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