The Reserve Bank of India (RBI) yesterday came out with a notification on declaration of dividend by banks and remittance of profits to head office by foreign bank branches in India.
The guidelines proposed in the notification are set to be effective from the fiscal year 2024-25.
In the notification, RBI said, “There have been significant changes in the regulatory framework governing banks post the issuance of these guidelines. Some of these developments also have implications for the guidelines on the declaration of dividends and remittance of profits. In view of this, the Reserve Bank has undertaken a comprehensive review of the extant regulations on the declaration of dividends and remittance of profits.”
It also said that the net NPA ratio for the financial year for which the dividend is proposed, should be less than six per cent.
In addition, it said that the banks eligible to declare dividend should pay dividend only on equity shares.
It further said that the foreign bank operating in India in branch mode, meeting eligibility criteria may remit net profit/surplus of a quarter or year from its Indian operations, without prior approval of the Reserve Bank, provided that the accounts of the bank are audited and in the event of excess remittance, the head office of that foreign bank immediately makes good the shortfall. Comments on the draft circular are invited from banks, market participants, and other stakeholders by 31st January, 2024.
