The Reserve Bank of India (RBI) on Tuesday came out with draft norms on declaration of dividend by banks and remittance of profits to head office of foreign bank branches in India.
The RBI circular explains the detailed eligibility criteria and guidelines on the check that are required.
The prudential requirements for banks to be eligible to declare dividends or remit profits include the need to meet the applicable regulatory capital requirement for each of the last three financial years including the financial year for which the dividend is proposed.
Another sensible requirement is that the net NPA ratio, for the financial year for which the dividend is proposed, should be less than six percent.
The Board of Directors or the management of the bank will have to consider the divergence in classification and provision for Non-Performing Assets (NPAs), including its trend. Current and projected capital position in relation to applicable capital requirement; and long-term growth plans of the bank must also be considered.
RBI said the earlier guidelines were revised in the light of implementation of Basel III norms, the review of the prompt corrective action (PCA) framework and the introduction of differentiated banks.
Comments on the draft circular are invited from banks, market participants and other stakeholders by January 31, 2024, the RBI said.