RBI Issues Draft Guidelines on Dividends Declaration & Profit Remittance

Ceiling is set on Dividend pay our ratios depending on the quantum of NPA’s and ranges from 15% to 50%

Reserve Bank of India has reviewed the guidelines for Declaration of dividend by banks  and have invited

comments from banks and market participant .

Guidelines have been reviewed and have been opened for public consultation, keeping in views the  implementation framework for Basel III standards as well as prompt corrective action (PCA) framework.

While considering the proposal for declaration of dividends or remittance of profits, the Board of Directors or the bank’s management should consider The divergence in classification and provisioning for NPA’s, Qualifications and Emphasis of Matter, highlighted by Auditors, long term growth of the banks and projected Capital Requirement.

Draft guidelines provides that the net NPA ratio, for the financial year for which the dividend is proposed, shall be less than six per cent and  Banking Regulators should not have issued any restrictions related to dividend declaration or profit remittance of profits.

Ceiling is set on Dividend pay our ratios depending on the quantum of NPA’s and ranges from 15 % to 50%.

circular will be applicable to all commercial banks including foreign bank operating in India in branch mode

Commercial Banks will have minimum capital requirements under Common Equity Tier (CET)1 Capital @ 5.5%, whereas it will be 6% for Small Finance Banks and Payment Banks.

RBI will finalize the rules post completion of Consultation.
RBI’s directive will enable EODB in the Country as previous rules on Declaration of Dividends, Remittance of profit by foreign banks operating in India will be repealed. It will also ease the Dividend repatriation by banks and at the same time will keep a check on the Capital availability for avoiding any systemic issues.

Galactik Views

Related articles