Rumors swirling around the stock market regarding microfinance dividend limits have caused confusion and panic. But Nepal Rastra Bank (NRB) officials say there’s no reason to worry.
The monetary policy for this fiscal year had stated that the central bank will review the current rule that restricts microfinance institutions from giving more than 15% dividend annually (whether in cash or bonus shares). The announcement was made in section 104 of the policy.
However, some market players allegedly misused this point to spread negative speculation. According to insiders, these misleading rumors were possibly spread to scare investors and buy microfinance shares at lower prices.
No surprise decision, says NRB
Chintamani Shivakoti, board member of NRB and former deputy governor, made it clear: “The board decides policy changes. No individual staff member can create or change such decisions alone. We’re surprised how false info got out in the name of our employees.”
He added, “We are not capping dividends to punish investors. Instead, we’re working to create flexibility so that strong microfinance firms can grow while ensuring vulnerable ones don’t over-distribute profits irresponsibly.”
- NRB plans to remove the 15% cap, but with conditions
- For example, firms may need to set aside part of their profit in reserves before giving higher dividends.
- The aim is to encourage capital growth while protecting weaker institutions from draining their earnings too quickly.
- The board’s understanding has been clear: dividend limits should be relaxed but controlled.
- “The 15% cap will be lifted,” said an NRB executive, “but not without guidelines.”
- The monetary policy was introduced with good intentions to support the capital market and not to harm investors.
Shivakoti stressed that false rumors, especially those claiming changes based on unnamed employees, are dangerous. “The actual review process of such policies doesn’t even require deep studies if already addressed in the main monetary policy. These things will be clarified officially soon, likely by the end of Ashoj.”
Capital increase also encouraged
Meanwhile, NRB sources pointed out that section 94 of the policy already paves the way for microfinance institutions to raise capital as needed—with the central bank’s approval.
Some microfinance companies have reportedly started discussions in their boards about issuing right shares, based on this provision. The idea is to:
- Prioritize bonus shares when distributing dividends
- Use right issues later, if more capital is still required
