Kathmandu. Nepal Rastra Bank (NRB) has decided to declare dividend (cash and bonus shares) of banks. <\/p>\n
The central bank has tightened the declaration of dividend by making the first amendment to the procedure related to the approval of financial statements and approval of dividends, 2082 for the purpose of the annual general meeting of banks and financial institutions. Due to the increase in the amount of risk in the financial system, the banks and financial institutions are likely to suffer losses in the future, the risk assessment and risk mitigation of some banks and financial institutions, the internal control system and corporate governance have not been strengthened, the ability to disburse loans will also be affected due to lack of capital fund even when the liquidity situation is comfortable, and in some cases, the loan classification may also be affected by continuously renewing the loans. <\/p>\n
Here are the new provisions for the approval of dividends<\/strong><\/span><\/p>\n }<\/p>\n 1. Licensed banks and financial institutions shall be allowed to declare or distribute cash dividends and bonus shares only if they fulfill the following conditions pursuant to Section 47 (2) of the Bank and Financial Institutions Act, 2073: <\/p>\n a) All initial expenses have been described, <\/p>\n b) No loss incurred up to the previous year, <\/p>\n c) Fixed capital, <\/p>\n d) Maintaining a minimum capital fund, <\/p>\n }<\/p>\n e) The amount to be set aside in the probable loss provision, <\/p>\n (f) Appropriated to the general reserve fund pursuant to Section 44 of the Bank and Financial Institutions Act, 2073, <\/p>\n g) The shares allotted to the general public have been fully issued. <\/p>\n 2. Not to allow the declaration and distribution of cash dividend from the amount of share premium and bargain purchase gain. <\/p>\n 3. To withhold the distribution of cash dividend and bonus shares dividend to be received by the banks and financial institutions until they sell the cross-holding of promoter shares of other licensed banks and financial institutions. <\/p>\n 4. Except for the Bank and Financial Institutions Act, 2073, the institutions dealing in savings and credit established pursuant to the prevailing laws shall withhold distribution of cash dividend and bonus shares to be received by such institutions until the sale of the investment made in the promoter shares of the licensed banks and financial institutions is completed. <\/p>\n However, this provision will not be applicable in the case of a ‘D’ class licensed entity already holding shares. <\/p>\n 5. The licensed institution shall not be allowed to declare cash dividend and bonus shares on the basis of the minimum capital fund maintained in the prescribed ratio at the end of the fiscal year, even if it has not been able to maintain minimum capital fund in the prescribed ratio at the end of the fiscal year. <\/p>\n 6. No permission shall be given to declare or distribute cash dividends and bonus shares during the period from the date of expiry of fiscal year till the date of obtaining approval of the Annual General Meeting and if such corrective action is not lifted within that period. <\/p>\n 7. The ‘A’ class licensed institutions and ‘B’ class licensed national level development banks will be allowed to declare cash dividend only if they maintain the prescribed minimum primary capital and capital fund or more with buffer after the supervisory adjustment. <\/p>\n Capital Education Framework-2007 (Updated July, 2008) and Integrated Directive No. 1 issued to Microfinance Financial Institutions for the purpose of declaring cash dividend in respect of class ‘B’ (other than national-level development banks)’, ‘C’ and ‘D’ category licensed institutions. As per the provision given in Clause 1, it would be appropriate to maintain a buffer of at least 0.5 percent of the minimum primary capital and at least 1 percent of the capital fund. <\/p>\n a) In the case of ‘B’ (excluding national level development banks) and ‘C’ class licensed institutions, the primary capital should be 6.5 percent and the capital fund should be 11 percent or more<\/p>\n .<\/p>\n b) In the case of a ‘D’ class licensed institution, the capital fund is 9 percent or more, <\/p>\n However, while distributing bonus shares, there shall be no obstruction in declaring or approving the distribution of cash dividend equal to the amount of tax required for tax purposes. <\/p>\n 8. To maintain a 100 percent loss provision in the claims of interbank investment, deposit, loan and other claims in the troubled banks and financial institutions. Similarly, a 100 percent loss provision should be maintained on the loans of customers whose assets including mortgages are in various problems. <\/p>\n However, if the concerned institution has taken the initiative to sell or withhold the assets contained in the above-mentioned claims, then the provision of loss should be maintained on the loan of at least the doubtful class and the provision of hundred percent loss should be maintained by the end of the financial year. If the Rastra Bank has banned the sale of collateral or if the concerned institution does not take the initiative to sell and release the deposit by writing to this bank in case such property is frozen, then the provision of one hundred percent loss provision should be maintained for the interbank investment, deposit, loan and other claims of such collateral. Also, if the loss provision has been established in the last financial year, the loss provision cannot be returned until such loan is recovered. <\/p>\n 9. Adjusting events up to the date of approval for issuance of financial statements may be adjusted in the financial statements of the previous fiscal year as per the existing Nepal Financial Reporting Standard ‘Events After the Reporting Period’, but for the purpose of declaring dividends, the adjusting events may be generally within 45 days from the date of the end of the fiscal year and the events certified by the external auditor as adjusting events may be adjusted and dividend approval may be granted on the basis of profit and loss calculation. <\/p>\n However, in the case of adjustment of loan loss provision, the loan loss arrangement amount may be adjusted by ascertaining that the concerned institution has repaid the loan from the sale of the collateral property and the borrower’s internal cash flow. <\/p>\n 10. If the limit is fixed on the declaration and distribution of dividend by this bank, the licensed banks and financial institutions will not be allowed to declare and distribute dividends beyond the limit prescribed by this bank from the net distributable profit of the financial year. <\/p>\n In order to avoid any ambiguity in calculating the distributable profits in this way, there shall be no obstruction in computing the total distributable profits for this year by adding the distributable profits accumulated from the previous years to the profits of this year. <\/p>\n 11. To prohibit the banks and financial institutions from declaring and distributing cash dividends other than tax purposes of bonus shares for the said fiscal year if they fail to maintain the average rate of interest on a monthly basis as prescribed. <\/p>\n 12. After the completion of five years from the date of commencement of the transaction by the bank or financial institution and after the issuance of ordinary shares, the promoter holding more than 2% of the paid-up capital of his or her shares as collateral shall withhold the cash dividend or bonus shares to be distributed by the bank or financial institution until the loan is repaid. <\/p>\n 13. If the paid-up capital of the institution to be established after the merger or acquisition is less than the total total of the paid up capital of the institutions involved in the merger, amalgamation or acquisition, the amount (savings) to be made in the capital reserve fund shall be accounted for and no permission shall be given to distribute cash dividends to the shareholders from such amount. <\/p>\n 14. While accounting for merger and acquisition, if any amount is left in the other component of the equity, other than the funds (including accumulated profits) and capital reserve funds, the amount shall be accounted for in the Merger\u00f7Acquisition Reserve and dividends shall not be allowed to be distributed to the shareholders from the amount in the reserve. <\/p>\n Provided, however, that the dividend may be distributed in an amount equal to the expense accounting in the calculation of the loss or loss of Goodwill arising out of the merger or acquisition. <\/p>\n 15. After payment of bonds or payable irrevocable preference shares, the amount to be kept in the Adjustment Fund may be transferred to the Capital Adjustment Fund and only bonus shares may be approved from the amount accumulated. <\/p>\n 16. Whether or not the interest income of the loan to be accounted for in accordance with the accounting policy of the licensed institution shall be deducted from the amount of interest income to be accounted on the basis of yield as per the directives of the Rastra Bank, other than the interest income earned within 15 days of the end of the fiscal year and the amount deposited in the Income Tax and Employees Bonus and Statutory Fund (General Reserve Fund and Corporate Social Responsibility Fund) as per the prevailing provisions and the remaining amount has been deposited in the regulatory fund by spending the accumulated profits. <\/p>\n 17. Whether or not the loan loss provision has been established accordingly in the event of payment of all outstanding dues (principal and interest) exceeded by the provisions of the loan classified in the inactive category (except restructuring and rescheduling) and the regularization of the loan for 3 months.<\/p>\n","protected":false},"excerpt":{"rendered":" Kathmandu. Nepal Rastra Bank (NRB) has decided to declare dividend (cash and bonus shares) of banks. The central bank has tightened the declaration of dividend by making the first amendment to the procedure related to the approval of financial statements and approval of dividends, 2082 for the purpose of the annual general meeting of banks […]<\/p>\n","protected":false},"author":16,"featured_media":229318,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[45117,45031,45159],"tags":[],"class_list":["post-313138","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bank-finance-en","category-banner-news-en","category-news-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/313138","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/comments?post=313138"}],"version-history":[{"count":1,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/313138\/revisions"}],"predecessor-version":[{"id":313139,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/313138\/revisions\/313139"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/media\/229318"}],"wp:attachment":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/media?parent=313138"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/categories?post=313138"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/tags?post=313138"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}