The Reserve bank of India (“RBI”) had in a Press Release dated 4th December, 2020 issued a statement on various Development and Regulatory policies by the RBI in view of COVID-19 pandemic.
In the Press Release, RBI stated that in view of the increasing significance of NBFCs in the financial system and their interlinkages with different segments, it had been decided to formulate guidelines on dividend distribution by NBFCs. Different categories of NBFCs would be allowed to declare dividend as per a matrix of parameters, subject to a set of generic conditions.
Now, in line with this a RBI has issued a Draft Circular on Declaration of Dividend by NBFCs (Draft Circular). Comments are invited on the Draft Circular from NBFCs, industry participants as well as other interested parties.
Comments must be sent in by December 24, 2020 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 may be sent by email to nbfcfeedback@rbi.org.in with the subject line- Feedback on Draft circular on declaration of dividend by NBFCs
Key Highlights:
• The Draft Circular provides the eligibility criteria for declaration of dividend and only those NBFCs adhering to the minimum prudential requirements would qualify to declare dividend
• The dividend pay-out ratio for different categories of companies is also specified
• NBFCs are directed to place a copy of the guidelines before the Board of the NBFC at its next meeting. The Board must take into account the interests of all stakeholders while deciding on the proposals for declaring dividend along with other specified aspects.
• The Draft Circular would become applicable for dividend to be declared for the financial year beginning April 01, 2020 (FY 2020-21) onwards.
• The following Master Directions will be updated basis the Circular:
i. Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016
ii. Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016
iii. Core Investment Companies (Reserve Bank) Directions, 2016
iv. Master Direction – Standalone Primary Dealers (Reserve Bank) Directions, 2016
Source: Reserve Bank of India
