Central bank tightens dividend distribution of banks and financial institutions

Credit crunch looms as commercial banks grapple with liquidity mismatch

KATHMANDU: All Class D microfinance institutions licensed by Nepal Rastra Bank (NRB) have been compelled to keep 50 percent of their dividend in the reserve fund.

Issuing a circular on Monday, the central bank stated that the microfinance institutions that distribute more than 20% dividend should keep the amount equaling 50% of the dividend amount in reserves.

Similarly, in order to promote overall financial stability in view of the impact due to the Covid-19, NRB has brought a change in the procedure for the preparation of the annual financial statement of 2077-78. Now, the general loan loss provision has to be increased by 0.3 percent in addition to the existing 1 percent and the total loan loss provision has to be maintained at 1.3%.

NRB has also extended the deadline for banks and financial institutions to publish interim financial reports by 15 days. If interest payment due by the end of Ashar is received before Bhadra 15, the income can still be chalked down under the financial report as of Ashar.

Meanwhile, banks and financial institutions will be allowed to declare and distribute cash dividends only up to 30 percent of the net distributable profit of the Fiscal Year 2077-78. However, such cash dividend should not exceed the weighted average interest rate on deposits maintained till Ashar’s end, 2078.

Fiscal Nepal |
Tuesday July 27, 2021, 01:12:27 PM |

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