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RBI's New Dividend Rules for NBFCs: Key Guidelines

Current · Source: Reserve Bank of India · RBI/2021-22/59 · issued 24 Jun 2021 · ~2 min read
Quick answerRBI has issued a circular prescribing uniform dividend distribution guidelines for all NBFCs, effective for dividends from profits of the financial year ending March 31, 2022. NBFCs must meet minimum prudential requirements like capital adequacy and net NPA below 6% for each of the last three years including the current year to declare dividends, with payout caps varying by NBFC type (e.g., 50% for other NBFCs).
The rule, in the simplest words
How it plays out — a real example

Ravi, an NBFC compliance officer in Indore, is checking if his NBFC can declare a dividend this year. He sees the company's bad loans are at 5% for the last three years and capital is strong, so he tells the board they meet RBI's new rules. The board then approves a dividend of 40% of profits, staying under the 50% cap, and Ravi feels proud the company is safe and compliant.

What changed

RBI introduced a comprehensive framework for NBFC dividend declarations, replacing ad-hoc practices. The guidelines set eligibility criteria including capital adequacy and net NPA thresholds (less than 6% for three years), and impose maximum dividend payout ratios (e.g., 50% for other NBFCs, 60% for CICs and SPDs). Board oversight is mandated to consider supervisory findings and auditor qualifications.

What it means for you

NBFCs must now ensure strict compliance with prudential norms before declaring dividends, limiting payouts to protect financial health. This enhances transparency and aligns dividend decisions with regulatory compliance, potentially reducing dividend amounts for some NBFCs. Lenders should review their capital and asset quality positions to avoid restrictions.

What you must do

Who it affects

All Non-Banking Financial Companies (NBFCs) regulated by RBI, including Housing Finance Companies (HFCs), Core Investment Companies (CICs), Standalone Primary Dealers (SPDs), and others

❓ Common questions

What is the effective date for these dividend guidelines?

The guidelines apply to dividends declared from profits of the financial year ending March 31, 2022, and onwards.

What is the maximum dividend payout ratio for most NBFCs?

For NBFCs other than those without public funds/customer interface, CICs, and SPDs, the maximum payout ratio is 50% of net profit.

Can an NBFC request RBI for an ad-hoc dividend dispensation?

No, the circular explicitly states that RBI will not entertain any request for ad-hoc dispensation on dividend declaration.

📜 Read the original circular — full text as issued by RBI
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Applicability 2. These guidelines shall be applicable to all NBFCs regulated by RBI 1 as below: (a) Applicable NBFCs as defined in Paragraph 2(2) of Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016; and (b) Applicable NBFCs as defined in Paragraph 2(2) of Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 . Effective Date 3. These guidelines shall be effective for declaration of dividend from the profits of the financial year ending March 31, 2022 and onwards. Board Oversight 4. The Board of Directors shall, while considering the proposals for dividend, take into account the following aspects: (a) Supervisory findings of the Reserve Bank (National Housing Bank (NHB) for HFCs) on divergence in classification and provisioning for Non-Performing Assets (NPAs). (b) Qualifications in the Auditors’ Report to the financial statements; and (c) Long term growth plans of the NBFC. The Board shall ensure that the total dividend proposed for the financial year does not exceed the ceilings specified in these guidelines. Eligibility criteria 5. NBFCs shall comply with the following minimum prudential requirements to be eligible to declare dividend: Table 1: Declaration of Dividend: Minimum Prudential Requirements Sl. No. Parameter Requirement 1. Capital Adequacy (a) NBFCs (other than Standalone Primary Dealers) shall have met the applicable regulatory capital requirement (refer Annex I ) for each of the last three 2 financial years including the financial year for which the dividend is proposed. (b) Standalone Primary Dealers (SPDs) should have maintained a minimum CRAR of 20 per cent for the financial year (all the four quarters) for which dividend is proposed. 2. Net NPA The net NPA ratio shall be less than 6 per cent in each of the last three years, including as at the close of the financial year for which dividend is proposed to be declared. 3. Other criteria (a) NBFCs shall comply with the provisions of Section 45 IC of the Reserve Bank of India Act, 1934. HFCs shall comply with the provisions of Section 29 C of The National Housing Bank Act, 1987. (b) NBFCs shall be compliant with the prevailing regulations/ guidelines issued by the Reserve Bank. The Reserve Bank or the NHB (for HFCs) shall not have placed any explicit restrictions on declaration of dividend. Quantum of Dividend Payable 6. NBFCs eligible to declare dividend as per paragraph 5 above, may pay dividend, subject to the following: (a) The Dividend Payout Ratio is the ratio between the amount of the dividend payable in a year and the net profit as per the audited financial statements for the financial year for which the dividend is proposed. (b) Proposed dividend shall include both dividend on equity shares and compulsorily convertible preference shares eligible for inclusion in Tier 1 Capital. (c) In case the net profit for the relevant period includes any exceptional and/or extra-ordinary profits/ income or the financial statements are qualified (including ’emphasis of matter’) by the statutory auditor that indicates an overstatement of net profit, the same shall be reduced from net profits while determining the Dividend Payout Ratio. (d) The ceilings on dividend payout ratios for NBFCs eligible to declare dividend are as under: Table 2: Ceilings on Dividend Payout Ratio Sl. No. Type of NBFC Maximum Dividend Payout Ratio (percentage) 1. NBFCs that do not accept public funds and do not have any customer interface No ceiling specified 2. Core Investment Company 60 3. Standalone Primary Dealers 60 4. Other NBFCs 50 (e) The Reserve Bank shall not entertain any request for ad-hoc dispensation on declaration of dividend. 7. A NBFC (other than SPD) which does not meet the applicable prudential requirement prescribed in Paragraph 5 3 above for each of the last three financial years, may be eligible to declare dividend, subject to a cap of 10 percent on the dividend payout ratio, provided the NBFC complies with the following conditions : (a) meets the applicable capital adequacy requirement in the financial year for which it proposes to pay dividend; and (b) has net NPA of less than 4 per cent as at the close of the financial year. 8. As per extant regulations contained in paragraph 30 of Master Direction - Standalone Primary Dealers (Reserve Bank) Directions, 2016 , in case of SPDs which have a CRAR at or above the regulatory minimum of 15 per cent during each of the quarters of the previous year, but lower than 20 per cent in any of those quarters, the dividend payout ratio shall not exceed 33.3 per cent. Reporting System 9. NBFC-D, NBFC-ND-SI, HFC & CIC declaring dividend shall report details of dividend declared during the financial year as per the format prescribed in Annex 2 . The report shall be furnished within a fortnight after declaration of dividend to the Regional Office of the Department of Supervision of the Reserve Bank/ Department of Supervision of NHB, under whose jurisdiction it is registered. 10. The relevant Master Directions shall be suitably updated. Yours faithfully, (Usha Janakiraman) Chief General Manager 1 Including Housing Finance Companies (HFCs), Core Investment Companies (CICs), Government NBFCs, Mortgage Guarantee Companies, Standalone Primary Dealers (SPDs), NBFC-Peer to Peer Lending Platform (NBFC-P2P) and NBFC- Account Aggregator (NBFC-AA) 2 Where an NBFC has been in existence for less than three financial years, it shall be since registration. 3 Sl.Nos.1(a) and 2 of Table 1, Paragraph 5 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/59 · issued 24 Jun 2021. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Topics: NBFC Regulations
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🛠 Banker’s toolkit — checklists & reply templates →
Key dataSee the live numbers behind this topic: NPA / Asset-Quality Tracker, Bank Health Scores — updated from official RBI data.
Key termsPlain-English definitions of terms in this circular — see the full Indian banking glossary. NBFC · CRAR (Capital adequacy) · Gross NPA (GNPA) · Wilful defaulter
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Who does what — compliance checklist
💰 Credit
  • Ensure net NPA ratio is below 6% for the last three years including the current year.
💻 IT / Systems
  • Verify your NBFC meets the minimum capital adequacy requirement for each of the last three financial years.
📜 Compliance
  • Check for any supervisory findings or auditor qualifications that may impact dividend eligibility.
  • Calculate dividend payout ratio within the specified ceiling (e.g., 50% for most NBFCs) after adjusting exceptional profits.
  • Document board oversight and compliance with all RBI regulations before declaring dividends.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (All Non-Banking Financial Companies (NBFCs) regulated by RBI, including Housing Finance Companies (HFCs), Core Investment Companies (CICs), Standalone Primary Dealers (SPDs), and others), your first concrete step on “RBI's New Dividend Rules for NBFCs: Key Guidelines” is: “Verify your NBFC meets the minimum capital adequacy requirement for each of the last three financial years.” (RBI issued this 24 Jun 2021).

  1. Circular: RBI/2021-22/59 -- RBI's New Dividend Rules for NBFCs: Key Guidelines
  2. Issued: 24 Jun 2021
  3. Action required: Verify your NBFC meets the minimum capital adequacy requirement for each of the last three financial years.
  4. Action required: Ensure net NPA ratio is below 6% for the last three years including the current year.
  5. Action required: Check for any supervisory findings or auditor qualifications that may impact dividend eligibility.
  6. Action required: Calculate dividend payout ratio within the specified ceiling (e.g., 50% for most NBFCs) after adjusting exceptional profits.
  7. Action required: Document board oversight and compliance with all RBI regulations before declaring dividends.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12118&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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