Kathmandu. Nepal Rastra Bank (NRB) has introduced new guidelines for dividend distribution of payment service providers (except banks and financial institutions). The central bank has issued the ‘Guidelines on Dividend Distribution for Institutions Licensed to Carry Out Payment Related Activities, 2082’.
Now based on this guidance, such organizations will have to formulate and implement a policy related to dividend distribution. Such a policy must have been approved by the board of directors of the organization.
According to the guidelines, details of the organization’s plans and priorities should be prepared regarding maintaining regulatory capital. A policy regarding distribution of cash dividend and share dividend should also be formulated.
Organization funding arrangement
- Risk sister fund
- Reserve Fund
Provision has been made in the guideline that the organization should mention about allocating a certain percentage of profit in such funds. The funds of the risk-bearing fund can be used to manage the damage caused by unexpected events to the organization and the details of the expenditure incurred by the funds will have to be reported to the Rastra Bank.
Similarly, payment system operators should also arrange infrastructure development fund and deposit a certain percentage of profit in the fund. Provision has been made in the guidance that such funds can be spent on the infrastructure expansion of the organization.
These institutions will have to deposit money in other funds designated by the Rastra Bank.
Prerequisites for dividend distribution
The financial condition of the organization needs to be strong for dividend distribution. For this, the licensed institution must comply with at least the following preconditions:
- The accumulated profits are not negative when declaring dividends.
- Dividend should be declared only on the basis of financial statements of the year in which the company made profits.
- Cash dividend cannot be declared from share premium and bargain purchase gain and the net worth of the organization is not negative while distributing share dividend.
- Adequate cash reserves at the time of declaring cash dividend.
- The conditions related to the loans consumed by the institution do not prohibit dividend distribution.
- During the on-site and non-on-site inspections carried out by the Rastra Bank, there is no serious concern that financial liability can be created.
Provision regarding proposal and acceptance of dividend distribution
They can offer to distribute dividends from the remaining accumulated profits by allocating funds to the funds. Prior approval of this bank will have to be obtained by including dividend proposal along with the approval to publish financial statements for dividend distribution.
To submit the following documents for approval to distribute dividends from the accumulated profits of the organization
- Decision of the Board of Directors regarding dividend distribution,
- Audited financial reports and tax-paid certificates for the previous financial year,
- Details of funds allocated to funds,
- Proof that the institution is not blacklisted by the Credit Information Center (6 months have not passed while submitting the application with all documents),
- Self-declaration stating that banks and financial institutions do not have overcrowded loans, no tax liability due to be paid, and compliance with the prevailing legal provisions÷
