NRB revises thresholds of cash dividends of microfinance

Nepal Rastra Bank (NRB) has permitted microfinance institutions (MFIs) to provide dividends of more than 20 percent under certain conditions.

Through amending a unified directive, the NRB has asked the microfinance institutions MFIs to maintain at least 50 percent of the dividend amount in their reserve funds, if the companies are to distribute dividends of more than 20 percent. The dividend could be both cash or bonus shares.

In the new rule, the central bank seems flexible on the matter of allowing the MFIs while they distribute dividends to their shareholders. As of now, the MFIs have been allowed to distribute cash dividends of only up to 30 percent of their net distributable profits.

Similarly, the MFIs were permitted to distribute cash dividends not exceeding the weighted interest rates on their deposits. Likewise, the MFIs would be prohibited from distributing cash dividends if the net distributable profit was less than five percent of their total paid-up capital.   

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