Team Blitz India
NEW DELHI: The Reserve Bank of India (RBI) proposed to tighten norms for dividend declaration by banks as it lowered the net non-performing asset (NNPA) ratio for a lender to be eligible for paying dividends.
In a draft circular released on January 2, the RBI said it would not entertain any ad hoc dispensation on the declaration of dividends. Feedback on the draft circular can be submitted by January 31. The RBI proposed the new norms for declaration of dividend for FY25 and onwards.
The RBI proposed that the net NPA ratio, for the financial year for which the dividend is proposed, should be less than 6 per cent.
At present, the minimum net NPA requirement is 7 per cent. Banks were also required to meet the applicable regulatory capital requirement for each of the last three financial years, including the one for which the dividend is proposed.
At present, if a bank does not meet the capital adequacy norm but has a capital adequacy ratio (CAR) of at least 9 per cent for the accounting year for which it proposes to declare a dividend, it would be eligible to declare a dividend provided its net NPA ratio is less than 5 per cent. There is no such provision in the draft.
