RBI Places Conditions Over Dividend Payment by NBFCs

RBI

The Reserve Bank of India (RBI) has placed certain conditions for non-banking financial companies (NBFCs) to pay dividends to shareholders from the financial year ending 31st March 2022.

Conditions are specific to different categories of NBFCs, which will have to meet minimum capital adequacy ratios, net non-performing asset (NPA) ratios, and a few other criteria to be able to declare dividend.

RBI said a non-bank financier must report a net NPA ratio of less than 6 percent in each of the last three years, including as at the close of the financial year for which dividend is proposed.

Along with certain conditions, RBI also specified the dividend payout ratios for various categories of non-banks. For non-bank financiers that do not accept public funds and do not have any customer interface, there is no ceiling on dividend payout ratio. Core investment companies and standalone primary dealers cay pay up to 60 percent of the income, while all other NBFCs can pay up to 50 percent.

Further, the adjusted net worth of a core investment company (CIC) should not be less than 30 percent of its aggregate risk-weighted assets, the guidelines said. For housing finance companies, the capital ratio should be a minimum of 13 percent as on 31st March 2020 and would increase by 1 percentage point each in FY21 and FY22.

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