RBI on 09.12.2020 has issued a Draft Circular to prescribe guidelines on distribution of dividend by NBFCs. The guidelines provides that only NBFCs with following eligibilities shall declare dividend:
- Deposit taking Non-Banking Financial Company (NBFC-D) and Systemically Important Non-Deposit taking Non-Banking Financial Company (NBFC-ND-SI) should have CRAR of at least 15% for last 3 years, including the accounting year for which it proposes to declare dividend.
- Non-Systemically Important Non-Deposit taking Non-Banking Financial Company (NBFC-ND) should have leverage ratio of less than 7 for the last 3 years, including the accounting year for which it proposes to declare dividend.
- Core Investment Company (CIC) should have Adjusted Net Worth (ANW) of at least 30% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items for last 3 years, including the accounting year for which it proposes to declare dividend.
- The net NPA ratio should be less than 6% in each of the last three years, including the accounting year for which it proposes to declare dividend.
- NBFCs should comply with the provisions of Section 45 IC of the RBI Act, 1934.
- NBFCs should comply with the prevailing regulations/ guideline issued by RBI.
- The proposed dividend should be payable only out of the current year’s profit.
- The Reserve Bank should not have placed any explicit restrictions on the NBFC on declaration of dividend.
Comments on the Draft Circular can be sent by NBFCs, industry participants and other interested parties by December 24, 2020 to the email nbfcfeedback@rbi.org.in.
