RBI proposes new dividend payment rule for banks, lenders with lower NPAs may offer higher dividends (2024)

FAQs

When RBI proposes tighter dividend payout guidelines for banks? ›

The proposal says banks with net non-performing asset ratio (NNPA) of ABOVE 6% and capital adequacy ratio (CRAR) of below 11.5% cannot declare dividends. The regulator has sought public feedback on the proposed norms by January 31 and the circular will be implemented from April 2024 onwards.

The Reserve Bank of India (RBI) recently issued a new framework on Domestic Money Transfer (DMT) for regulated firms, making stricter Know Your Customer (KYC) record standards, focusing on banking services, payment systems. The new guidelines will come into effect from November 1, 2024.

Net interest income soared to ₹2.1 trillion by the end of March 2024, up from ₹87,420 crore the previous year, as detailed in the central bank's annual report released on Thursday. This substantial rise in net income enabled the RBI to declare a record dividend payout of ₹2.1 trillion to the government for FY24.

Synopsis. The Reserve Bank of India has proposed a revised graded dividend payout policy, allowing banks with a net non-performing assets (NPA) ratio less than 6% and capital adequacy above regulatory thresholds for the past three financial years to declare dividends.

Rule 3 of Dividend Rules prescribes the conditions to be complied with for declaring dividend out of reserves. A pertinent question here is – whether a company can declare dividend out of 100% of the amount that has been transferred to General Reserve.

Economic literature presents three main reasons for adjustments to dividend payouts: asymmetric information between shareholders and management, the presence of agency costs, and regulatory constraints.

Top 5 Nigerian banks that declared the most dividends

Zenith Bank topped the list by disbursing a total of ₦505.48 billion from its profit of ₦1.6 trillion during the period in review.

SBI has declared the highest dividend (relative to face value) among all PSBs at ₹13.70 per equity share (1370 per cent on equity share of Re 1 face value) in FY24 against ₹11.3 in FY23. India's largest bank alone accounts for about 39 per cent of the total PSB dividend to be paid to the government in FY24.

Banks have been the largest contributors to dividends globally for at least four of the last six quarters. Financial companies have contributed to at least 25% of global payouts paid in the last three years.

Preferred stocks have a different holding period from common stocks, and investors must hold preferred stocks for more than 90 days during a 181-day period that starts 90 days before the ex-dividend date.2 The holding period requirements are somewhat different for mutual funds.

What is the 60 day dividend rule? ›

The fund must have held the security unhedged for at least 61 days out of the 121-day period that began 60 days before the security's ex-dividend date. (The ex-dividend date is the date after the dividend has been paid and processed and any new buyers would be eligible for future dividends.)

The 45-Day Rule requires resident taxpayers to hold shares at risk for at least 45 days (90 days for preference shares, not including the day of acquisition or disposal) in order to be entitled to Franking Credits.

If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. On July 1, 2024, Company XYZ declares a dividend payable on July 17, 2024, to its shareholders.

In common parlance, Dividend' means the profit of the Bank, which is not retained in the business and is distributed among the shareholders in proportion to the amount paid up on the shares held by them. b. CRAR: It is the ratio of the Bank's capital to its risk weighted assets. c.

There are several factors which affect dividend policy, the most important of which are the following: (a) legal rules, (b) liquidity position, (c) the need to pay off debt, (d) restrictions in debt contract, (e) rate of expansion of assets, (f) profit rate, (g) stability of earnings, (h) access to capital markets, (i) ...

Dividend should be declared only out of profits earned by the company. However, profits out of capital transactions, if not realised in cash, shall be excluded for this purpose. Certain profits do not arise in the normal course of business as they are earned out of capital transactions.