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The <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword>'s draft circular on dividend distribution by NBFCs is unlikely to impact most of the industry players, said ratings agency ICRA on Thursday. <div type="Article" hostid="261" msid="79565357" title="RBI bars public and cooperative banks from doling of dividends for a second time — adds to the three-year drought of payouts" mstype="2" mssubtype="0"></div> The <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> has proposed that NBFCs should have at least 15 per cent Capital to Risk Weighted Assets Ratio (CRAR) for the last 3 years, including the accounting year for which it proposes to declare a dividend. The RBI sought comments on the draft circular from NBFCs, industry participants and other interested parties by December 24. According to ICRA, over the last three years, dividend pay-out ratios have been about 10-20 per cent for most entities, with few in the range of 20-30 per cent. The ratings agency expects most NBFCs to comfortably meet the CAR (Capital Adequacy Ratio) criteria but a few entities having high NPAs would find it difficult to meet the net NPA filter and thus dividend payout for them could be impacted, if this circular is implemented. It noted that while HFCs (housing finance companies) have not been specifically mentioned in this draft, meeting the CAR criteria would be relatively easier given the lower risk weights on the large part of their portfolio. Furthermore, the Net NPA criteria specified for NBFCs may not be a constraint for HFCs to pay out dividend considering the low NPAs for the segment currently. "NBFCs complying with the minimum regulatory capital adequacy ratio or leverage ratio for the last three years and having net NPA below 6 per cent in each of the last three years can declare dividends with a pay-out ratio of up to 50 per cent or as per the matrix proposed by the RBI," said Manushree Saggar, Vice President - Financial Sector Ratings, ICRA. SEE ALSO: <a href="https://www.businessinsider.in/tech/apps/news/instagram-facebook-messenger-outage-in-india-europe-japan-and-other-parts-of-the-world/articleshow/79661777.cms">Instagram and Facebook Messenger down for users across the globe</a> <a href="https://www.businessinsider.in/stock-market/news/infosys-hcl-tech-and-tcs-stocks-may-see-another-surge-estimates-edelweiss-heres-why/articleshow/79659516.cms">One research firm says shares of Infosys, HCL Tech, and TCS may see another surge — here's why</a> <a href="https://www.businessinsider.in/tech/news/india-desi-gps-finally-joins-china-russia-and-the-us-after-a-two-year-long-wait/articleshow/79656300.cms">India’s desi-GPS is now in the same league as the US, Russia and China — can scan 1,500 kilometres beyond its own borders</a>

RBI's draft NBFC dividend policy unlikely to impact most players, claims ICRA

New Delhi, <keyword id="9003972" type="COMPANY" weightage="20" keywordseo="the-finance-industry-development-council">The Finance Industry Development Council</keyword> (FIDC), an industry body of asset and loan financing NBFCs has written to <keyword id="102024" type="COMPANY" weightage="20" keywordseo="The-Reserve-Bank-of-India">the Reserve Bank of India</keyword> (RBI) seeking implementation of the proposed guidelines for <keyword id="1874148" type="UNKNOWN" weightage="20" keywordseo="Dividend-distribution">dividend distribution</keyword> by NBFCs with effect from April 1, 2021. As per the draft circular released by the RBI, the guidelines would be applicable for dividend to be declared for the <keyword id="426914" type="PERSON" weightage="20" keywordseo="current-financial-year">current financial year</keyword> beginning April 1, 2020. In a letter to the RBI, the industry body said: "The Draft Circular is proposed to take effect from the financial year beginning April 1, 2020 which would in effect impact the declaration of dividend for the current financial year as well in which interim dividend may already have been declared - this will be akin to giving retrospective effect to the guidelines and hence the request should be for the guidelines to take effect only from April 1, 2021, i.e. for dividend from financial year 2021-2022 onwards." It further said that for preference shares which have already been issued with a certain promised rate of dividend, the proposed guidelines could in effect bar the Systemically Important Non-Deposit taking <keyword id="153220" type="COMPANY" weightage="20" keywordseo="non-banking-financial-company">Non-Banking Financial Company</keyword> (NBFC-ND-SI) from making payment of the same despite having sufficient distributable profits in terms of the Act. All such existing instruments should be grandfathered, FIDC said. It also told the central bank that the circular should be explicitly limited to dividend on only equity shares. Companies often issue redeemable preference shares carrying fixed rates of dividend which need to be treated differently. "Without prejudice to this suggestion, furthermore, we have to state that under Section 47 (Voting Rights) of the Act, failure to pay dividend for a period of two years or more gives preference shareholders voting rights at par with equity shareholders." According to FIDC, if the proposed guidelines under the draft circular are introduced, such a situation could be triggered despite the NBFC-ND-SI having distributable profits available for honouring the promised preference share dividend. The Act should be amended as a pre-cursor to the draft circular to ensure that the voting rights would not trigger if the non-payment of the preference share dividend for a period of two years or more is due to the RBI stipulation, it added, among other recommendations. The RBI released the draft circular for dividend distribution by NBFCs on December 9. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/mrs-bectors-food-ipo-investors-saw-their-money-double-on-listing-day/articleshow/79934860.cms">Mrs Bector’s Food IPO investors saw their money double on listing day</a> <a href="https://www.businessinsider.in/thelife/personalities/news/from-taking-on-yahoo-to-being-tamed-by-chinas-communist-party-its-been-a-roller-coaster-decade-for-jack-ma/slidelist/79935613.cms">From taking on Yahoo to being tamed by China’s Communist Party— it’s been a roller coaster decade for Jack Ma</a> <a href="https://www.businessinsider.in/careers/news/ey-is-looking-to-hire-9000-techies-in-2021-to-boost-its-digital-services/articleshow/79936576.cms">EY is looking to hire 9,000 techies in 2021 to boost its digital services</a>

'Dividend payout norms for NBFCs should come into effect from FY22'

Mumbai, Apr 17 () The RBI on Friday further eased bad-loan rules, froze dividend payment by lenders and pushed banks to lend more by cutting the reverse repo rate by 25 basis points, as it unveiled a second set of measures to support the economy hit hard by a coronavirus-led slowdown. In his second televised address since the nationwide lockdown began from March 25, the Reserve Bank of India (RBI) Governor Shaktikanta Das pledged to boost liquidity and expand bank credit. In a measure that effectively meant that bad loans or non-performing asset (NPA) classification will now happen after 180 days instead of the current policy of 90 days of payment default, the RBI announced an asset status freeze on loans that have been granted moratorium or deferment on interest/principal payment. This would cover the borrowers of both banks and NBFCs. This means that the moratorium period will not lead to a spurt in NPAs in the system and will allow the borrowers across retail, small and medium-sized enterprises (SMEs) and corporates availing the moratorium to access additional funding from banks or non-banking financial companies (NBFCs). Das, however, said lenders will have to make an additional provision of 10 per cent for those exposures under moratorium. RBI cut reverse repurchase rate, a tool to control the money supply, to 3.75 per cent with immediate effect to encourage banks to deploy surplus funds within the system towards lending. The reverse repo rate cut will discourage banks from parking cash with the RBI and encourage them to lend to the economy. It kept its benchmark repo rate, which was reduced late last month, unchanged at 4.40 per cent. The central bank also allowed states to borrow 60 per cent more via ways and means advance facility available and extended the increased limit until September 30. To preserve capital, RBI asked banks not to pay any further dividends for the fiscal year ended March 31. "It is imperative that banks conserve capital to retain their support for the economy and absorb losses in an environment of heightened uncertainty," Das said. The dividend curbs will be reviewed in the quarter ending September 30. Regulators around the globe have similarly advised lenders to cut or delay dividends so as to ensure that they have enough buffers to weather what the International Monetary Fund (IMF) predicts to be the worst global recession since the 1930s. RBI will inject Rs 50,000 crore in a new round of targeted long-term repo operations and asked banks to use the funds availed through this facility to benefit NBFCs and micro-finance institutions among others. The RBI had on March 27 announced a steep 75 basis points cut in the repo rate, slashed cash reserve ratio and permitted a three-month moratorium on all loans, including home loans, extended by commercial banks and lending institutions. "Since March 27, 2020, when I spoke to you last, the macroeconomic and financial landscape has deteriorated, precipitously in some areas; but light still shines through bravely in some others," Das said. "India is among the handful of countries that is projected to cling on tenuously to positive growth (at 1.9 per cent). In fact, this is the highest growth rate among the G-20 economies," he said adding the World Trade Organisation sees global merchandise trade contracting by as much as 13-32 per cent in 2020. For 2021, the IMF projects sizable V-shaped recoveries: close to 9 percentage points for global GDP. "India is expected to post a sharp turnaround and resume its pre-COVID pre-slowdown trajectory by growing at 7.4 per cent in 2021-22." RBI also announced a Rs 50,000 crore special refinance to pan-India financiers like Sidbi, Nabard and NHB that provide affordable funds to the rural sector and agriculture. Of this, Rs 10,000 crore will be for National Housing Bank (NHB) which will ease some of the liquidity challenges for housing financing companies to get bank financing. RBI has also allowed NBFC loans to delayed commercial real estate projects to be extended by a year without restructuring. In a move that will bring much-needed relief to cash-starved developers, the RBI has further extended the date of commencement of commercial operations (DCCO) of project loans for commercial real estate projects which are delayed for reasons beyond the control of promoters. It will help in easing out time for maintaining and managing cash flows for these developers. The Indian economy may be headed for a rare quarterly contraction during April-June as businesses shut down and restrictions on the movement of people and goods imposed through the world's biggest lockdown. The lockdown which was initially for 21 days, has been extended till May 3. "The RBI will monitor the evolving situation continuously and use all its instruments to address the daunting challenges posed by the pandemic," he said. Commenting on the measures, Rumki Majumdar, Economist, Deloitte India, said: "The over-arching goal of the RBI announcements has been to ensure enough liquidity in the market, availability of credit, and sustenance of the MSMEs. "The recent outbreak of the coronavirus pandemic has hit MSMEs, which account for 45 per cent of total manufacturing output and 40 per cent of exports." MSMEs are facing a double whammy - a supply disruption in the one hand, and a fall in sales orders and revenues on the other. Meanwhile, RBI expects inflation to ease, which gives some headroom to act. DP ANZ ANZ ANSANS

RBI eases bad loan rules, cuts reverse repo rate, freezes dividend payout by banks

<ul><li>In a bid to meet its <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword> target, the government has secured a much-needed lifeline from the RBI. </li><li>The RBI will transfer ₹280 billion worth of its <keyword id="6698811" type="UNKNOWN" weightage="20" keywordseo="Surplus">surplus</keyword> reserves in the form of an <keyword id="7341827" type="UNKNOWN" weightage="20" keywordseo="Advanced-dividend">advanced dividend</keyword> to the government. </li><li>This is in addition to the ₹400 billion it has already transferred this fiscal year so far. </li></ul>In a desperate attempt to meet its fiscal deficit target, which has been raised slightly from 3.3% to 3.4% of GDP, the Modi administration has secured a much-needed lifeline from the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI). The RBI will transfer ₹280 billion worth of its surplus reserves in the form of an advanced dividend to the government for the half year ended December 2018, in addition to the ₹400 billion it has already transferred this fiscal year so far. Speaking to <a href="https://twitter.com/ETNOWlive/status/1097496331684200448">ET Now</a>, Ananth Narayan, a professor of SPJIMR, said that the government’s practice of taking an advanced dividend from the RBI was akin to a company taking money from a subsidiary in advance of the subsidiary having earned that amount. He also said that the government’s projections of RBI revenues for the year were highly optimistic. The RBI’s financial year runs from July to June while the government follows a April to March system, making an advanced dividend payout a particular burden on the central bank, which has three more months before the year ends. Of course, this was expected, especially in the wake of a extremely <a href="https://www.businessinsider.in/rbi-may-bump-up-dividend-to-help-modi-fund-the-generous-budget-sops/articleshow/67862426.cms">populist interim budget</a> and a shortfall in tax revenues. One of the budget’s major initiatives, a cash handout to farmers, <a href="https://economictimes.indiatimes.com/news/politics-and-nation/pm-narendra-modi-to-launch-scheme-to-give-rs-6000-to-farmers-on-feb-24/articleshow/67979715.cms">will commence on February 24th</a>, and is expected to comprise an outlay of around ₹200 billion by March 31st. A clash between the central government and the RBI over the size of such a transfer, among other issues, culminated in the resignation of former governor <keyword id="6375119" type="PERSON" weightage="20" keywordseo="urjit-patel">Urjit Patel</keyword> in December last year. When <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword>, a government insider, was installed in Patel’s place, his motivations were clear: to play ball with the Modi administration. Earlier this month, he went on record to say that since the RBI was a government institution, the central government <a href="https://www.news18.com/news/business/its-govt-right-to-demand-interim-dividend-and-use-it-the-way-it-wants-says-rbi-governor-2028619.html">had the right</a> to decide how much of its reserves it required. The dividend transfer will help the Modi government try and deliver on its budget promises, which will boost its prospects for re-election in May. However, this might come at the cost of the central bank’s financial health. ‘The RBI has <a href="https://www.business-standard.com/article/finance/rbi-has-insufficient-capital-much-less-surplus-to-hand-over-to-government-119012400500_1.html">inadequate capital reserves</a> to service such a transfer, according to the Centre for Advanced Financial Research and Learning, a Mumbai-based think tank. A study by the think tank showed that at 6.6%, the RBI’s capital-to-assets ratio, was more than 30 basis points lower than the average level seen in emerging markets, indicating under-capitalisation. Besides, the RBI needs its surplus capital to shore up the rupee, lend to banks and provide adequate liquidity support to the economy, which is reeling from a slowdown in credit growth and aggregate demand following <a href="https://www.financialexpress.com/industry/banking-finance/all-you-need-to-know-about-current-liquidity-crisis-at-indias-nbfc/1370224/">the crisis in the NBFC sector</a>. SEE ALSO: <a href="https://www.businessinsider.in/what-if-interim-budget-2019-replaces-subsidy-with-cash-transfer/articleshow/67658379.cms">Explained: The cost of giving India's farmers cash instead of subsidies</a> <a href="https://www.businessinsider.in/rbi-may-bump-up-dividend-to-help-modi-fund-the-generous-budget-sops/articleshow/67862426.cms">RBI may bump up dividend to help Modi fund the generous budget sops</a> <a href="https://www.businessinsider.in/the-resignation-of-the-governor-of-indias-central-bank-sends-a-clear-indication-about-the-erosion-of-institutional-autonomy-under-the-modi-administration/articleshow/67040287.cms">The resignation of the governor of India’s central bank sends a clear indication about the erosion of institutional autonomy under the Modi administration</a>

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RBI's draft NBFC dividend policy unlikely to impact most players, claims ICRA

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'Dividend payout norms for NBFCs should come into effect from FY22'

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RBI eases bad loan rules, cuts reverse repo rate, freezes dividend payout by banks

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The Modi administration’s overspending gets rewarded with an interim dividend from the central bank

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