With a view to assure economic discipline and transparency, the Reserve Bank of India (RBI) on Tuesday proposed suggestions for non-banking economic providers (NBFCs) for declaring dividends.
Under the proposed norms, only these NBFCs that meet the prescribed prudential needs would be permitted to declare and distribute dividends.
One of the norms prescribed by the RBI is that the net non-performing asset (NPA) ratio of NBFCs need to be much less than 6 per cent in every of the final 3 years, which includes the accounting year for which it proposes to declare dividend.
“In order to infuse greater transparency and uniformity in practice, it has been decided to prescribe guidelines on distribution of dividend by NBFCs,” mentioned the draft circular on which the RBI has invited comments from the stakeholders by December 24.
On capital adequacy and leverage, the draft mentioned deposit-taking NBFCs and systemically vital non-deposit-taking NBFCs need to have the capital-to-threat weighted assets ratio (CRAR) of at least 15 for the previous 3 years, which includes the accounting year for which it proposes to declare dividend.
Non-systemically vital non-deposit-taking NBFCs need to have a leverage ratio of much less than seven for the final 3 years, which includes the accounting year for which it proposes to declare dividend.
Core investment firm (CIC) need to have adjusted networth (ANW) of at least 30 per cent of its aggregate threat-weighted assets on balance sheet and threat-adjusted worth of off-balance sheet things for the previous 3 years, which includes the accounting year for which it proposes to declare dividend.
Unlike banks, at the moment, there are no suggestions in location with regard to distribution of dividend by NBFCs.
Keeping in view the rising significance of NBFCs in the economic technique and their inter-linkages with distinctive segments, the RBI had decided to formulate suggestions on dividend distribution by NBFCs.