NEW DELHI: The Reserve Bank of India (RBI) has set a relatively relaxed criteria for dividend payout, as compared with the draft guidelines, for non-bank lenders (NBFCs) seeking to pay dividends to shareholders from the ongoing financial year.
According to the new guidelines, both NBFCs and housing financiers will need to meet certain benchmarks to qualify for a dividend payment. For instance, firms with net NPAs above six per cent for each of the last three financial years, including the year when the dividend is announced, will not be able to pay a dividend.
The dividend payout ratio, which is the ratio between the amount of the dividend payable in a year and the net profit, is now capped at 50 to 60 per cent, depending upon the nature of the business. However, there will be no cap on NBFCs that do not accept deposits.
“Over the last three years, dividend payout ratios have been about 10-20 per cent for most entities, with few in the range of 20-30 per cent... We expect dividend payout for most NBFCs is unlikely to be impacted,” said Manushree Saggar, vice-president and sector head at ICRA.
The growing significance of NBFCs has made it imperative to put in place such criteria for declaration of dividend by different categories of NBFCs. The other criteria is an NBFC will need to meet the mandated capital requirement for each of the last three financial years. For instance, a deposit-taking NBFC should have a capital adequacy ratio of at least 15 per cent for the last three years.
The non-deposit-taking NBFC should have leverage ratio of below 7 per cent for the last three years, and a core investment company should have adjusted net worth of at least 30 per cent of its aggregate risk-weighted assets on its balance sheet and risk adjusted value on off-balance sheet items for the last three years. Standalone primary dealers should maintain a minimum capital-to-risk weighted assets ratio of 20 per cent for the financial year for which dividend is proposed.