NEW DELHI: The Reserve Bank of India (RBI) has said that non-banking finance companies (NBFC) with minimum 15 per cent capital adequacy and net non-performing assets (NPA) below six per cent for three years will be eligible to declare dividend from this fiscal onwards.
According to the draft dividend payout circular released by the central bank on Wednesday, a better managed NBFC with less than four per cent net NPA can still become eligible for dividend distribution even if the minimum capital and leverage norms are not met for the previous two years.
These are part of a matrix where capital adequacy, leverage ratio, adjusted net worth and net NPA set the criteria for distributing the earnings with shareholders. Stronger entities can offer higher but with a cap of 50 per cent of net profit for the accounting year for which the dividend is proposed. The dividend has to be paid only out of the current year’s profit.
In the case of non-systemically important non-deposit taking NBFCs, the leverage ratio (debt-to-equity) should be less than 7 for the last 3 years, including the accounting year for which it proposes to declare dividend.
For Core Investment Company (CIC), the Adjusted Net Worth should be at least 30 per cent of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items for last three years, including the accounting year.