The Reserve Bank of India vide its notification dated 9th December 2020 has issued guidelines on distribution of dividend by NBFCs however the NBFCs shall comply with the prescribed minimum capital adequacy and leverage ratio as mentioned in the notification.
The Deposit-taking Non-Banking Financial Company and Systemically Important Non-Deposit taking Non-Banking Financial Company should have CRAR of at least 15% for last 3 years, including the accounting year for which it proposes to declare dividend and Non-Systemically Important Non-Deposit taking Non-Banking Financial Company should have leverage ratio of less than 7 for the last 3 years, including the accounting year for which it proposes to declare dividend.
The 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.
Further the NBFCs, which fulfil the above eligibility criteria, may declare and pay dividend, subject to the following that the Dividend pay-out ratio for NBFC-D and NBFC-ND-SI shall be as per the matrix furnished and in case the profit for the relevant period includes any extra-ordinary profits/ income, the pay-out ratio shall be computed after excluding such extra-ordinary items.
The financial statements pertaining to the year for which the NBFC is declaring dividend should be free of any qualifications by the auditors, which have an adverse bearing on the profit during that year. In case of any qualification to that effect, the net profit should be suitably adjusted while computing the dividend pay-out ratio.
The guidelines will be applicable for dividends to be declared for the financial year beginning April 01, 2020 (FY 2020-21) onwards.
However RBI has invited Feedback on the Draft Circular which may be forwarded to the Chief General Manager, Reserve Bank of India, Department
of Regulation (NBFCs), 2nd Floor, Main Office Building, Shahid
Bhagat Singh Marg, Fort, Mumbai – 400001 or by email with the subject line “Feedback on Draft circular on declaration of dividend by NBFCs which shall be sent before 24th December 2020.
