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TMI BlogDeclaration of dividends by banksX X X X Extracts X X X X X X X X Extracts X X X X ..... subject to a ceiling of 33.33% on the dividend payout ratio, without obtaining the prior approval of RBI, subject to the fulfilment of the laid down criteria. 2. On the basis of the experience gained, it has been decided to grant general permission to banks to declare dividends, subject to compliance with the guidelines laid down below: 3. Eligibility criteria for declaration of dividend Only those banks, which comply with the following minimum prudential requirements, would be eligible to declare dividends: i. The bank should have: * CRAR of at least 9 % for preceding two completed years and the accounting year for which it proposes to declare dividend. * Net NPA less than 7 %. In case any bank does not meet the above CRAR norm, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio. iii. The financial statements pertaining to the financial year for which the bank is declaring a dividend should be free of any qualifications by the statutory auditors, which have an adverse bearing on the profit during that year. In case of any qualification to that effect, the net profit should be suitably adjusted while computing the dividend payout ratio. iv. For 2004-05 if the Investment Fluctuation Reserve is less than 4% of securities included in the HFT & AFS categories, the dividend payout ratio shall be computed with respect to the Adjusted Net Profit. [Adjusted Net Profit = Net Profit - ({4% of (HFT + AFS)} - IFR)] The Reserve Bank will not entertain any application for a higher dividend payout ratio than the one fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % Range of Dividend Payout Ratio A 11% or more for each of the last 3 years Up to 40 Up to 35 Up to 25 Up to 15 B 10% or more for each of the last 3 years Up to 35 Up to 30 Up to 20 Up to 10 C 9% or more for each of the last 3 years Up to 30 Up to 25 Up to 15 Up to 5 D 9% or more in the Current year Up to 10 Up to 5 Nil Notes 1. Banks should have a CRAR of at least 9% for preceding two completed years and the accounting year for which it proposes to declare dividend and Net NPA less than 7% to be eligible to declare dividends. In case any bank does not meet the above CRAR norm, but is having a CRAR of at least 9 % for the accounting year for which it proposes to declare dividend, it would be eligible to declare div ..... X X X X Extracts X X X X X X X X Extracts X X X X
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