RBI guidelines on distribution of dividend by NBFCs

Reserve Bank of India through circular dated June 24, 2021 has issued guidelines on distribution of dividend by NBFCs. NBFCs eligible to declare dividend may pay dividend, subject to the following:

1. 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 for the financial year for which the dividend is proposed.
2. Proposed dividend shall include both dividend on equity shares and compulsorily convertible preference shares eligible for inclusion in Tier 1 Capital.
3. In case the net profit for the relevant period includes any exceptional and/or extraordinary profits/ income or the financial statements are qualified (including ’emphasis of matter’) by the statutory auditor that indicates an overstatement of net profit, the same shall be reduced from net profits while determining the Dividend
   Payout Ratio.
4. The Reserve Bank shall not entertain any request for ad-hoc dispensation on declaration of dividend.

These guidelines shall be effective for declaration of dividend from the profits of the financial year ending March 31, 2022 and onwards.