The central bank has tightened the rules on bank and financial institution dividend distribution

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The Nepal Rastra Bank (NRB) has mandated that all Class D microfinance institutions keep 50% of their dividends in the reserve fund.

The central bank noted in a circular issued on Monday that microfinance firms that disburse more than 0% dividend should hold 50 percent of the dividend amount in reserves.

Similarly, in light of the impact of the Covid-19, the NRB has changed the for preparing the annual financial statement for 2077-78 in order to promote overall financial stability. Now, in addition to the existing 1%, the general loan loss provision must be increased by 0.3 percent, while the overall loan loss provision must remain at 1.3 percent.

The deadline for banks and financial institutions to produce interim financial reports has extended by 15 days by the NRB. If an interest payment due by the end of Ashar arrives before Bhadra 15, the income can still be recorded in the Ashar financial report.

Banks and financial institutions will be limited to declaring and distributing cash dividends of up to 30% of their net distributable earnings for Fiscal Year 2077-78.

However, such a cash dividend cannot be greater than the weighted average interest rate on deposits until the conclusion of Ashar in 2078.

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