What changed
RBI has introduced new directions for Payments Banks to follow prudential norms while declaring dividends. The directions specify minimum capital adequacy and non-performing asset ratios that Payments Banks must meet before declaring dividends.
What it means for you
These directions aim to ensure that Payments Banks maintain a minimum level of capital adequacy and manage their non-performing assets effectively before distributing dividends to shareholders. This will help maintain stability in the banking system and protect the interests of depositors.
What you must do
- Ensure CRAR of at least 9% for the preceding two completed financial years and the financial year for which dividend is proposed (or if not, ensure CRAR at least 9% for current year and NNPA less than 5%)
- Maintain NNPA ratio less than 7% for the financial year for which dividend is proposed (or less than 5% if using alternative CRAR criterion)
- Comply with sections 15 and 17 of the Banking Regulation Act, 1949
- Comply with all prevailing RBI regulations including minimum regulatory capital, adequate provisions, and transfer to Statutory Reserves
- Pay dividend only out of current financial year's net profit
- Ensure RBI has not placed any explicit restrictions on dividend declaration
- Adhere to dividend payout ratio matrix based on CRAR and NNPA categories (max 40% payout)
- Review and consider current and projected capital position, provisions, and economic environment before declaring dividend
Who it affects
Payments Banks, Shareholders, Depositors
What is the minimum CRAR required for Payments Banks to declare dividends?
At least 9% for the preceding two completed financial years and the financial year for which dividend is proposed
What is the maximum NNPA ratio allowed for Payments Banks to declare dividends?
Less than 7% for the financial year for which dividend is proposed