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RBI issues guidelines for declaration of dividends by NBFCs

In order to infuse greater transparency and uniformity in practice, the Reserve Bank of India (RBI) has decided to prescribe guidelines on distribution of dividend by NBFCs. These guidelines shall be applicable to all NBFCs regulated by RBI Including Housing Finance Companies (HFCs), Core Investment Companies (CICs), Government NBFCs, Mortgage Guarantee Companies, Standalone Primary Dealers (SPDs), NBFC-Peer to Peer Lending Platform (NBFC-P2P) and NBFC- Account Aggregator (NBFC-AA). These guidelines shall be effective for declaration of dividend from the profits of the financial year ending 31 March 2022 and onwards.

The Board of Directors shall, while considering the proposals for dividend, take into account the following aspects:

  1. Supervisory findings of the Reserve Bank (National Housing Bank (NHB) for HFCs) on divergence in classification and provisioning for Non-Performing Assets (NPAs).

  2. Qualifications in the Auditors’ Report to the financial statements; and

  3. Long term growth plans of the NBFC.

The Board shall ensure that the total dividend proposed for the financial year does not exceed the ceilings specified in these guidelines.


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