Nepal Rastra Bank (NRB) has issued a new directive titled “Dividend Distribution Guidelines, 2082” aimed at making the process of profit allocation and dividend payouts by licensed payment institutions more transparent, structured, and accountable.
Executive Director of NRB, Kiran Pandit, stated that the guideline intends to ensure that institutions distribute profits in a way that supports long-term sustainability, operational efficiency, and risk management. It is expected to contribute to the development of a secure, healthy, and capable payment system.
Provisions
- Institutions must formulate and implement a dividend distribution policy, which must be approved by the board of directors.
- They are required to allocate a certain percentage of profits to a Risk Bearing Fund and Reserve Fund, which can be used in case of unforeseen losses.
- Any expenditures made from such funds must be reported to the central bank.
- Operators of payment systems must also create an Infrastructure Development Fund by setting aside a fixed percentage of profits, to be used for institutional infrastructure expansion.
Criteria
- The retained earnings must not be negative.
- Dividends can only be declared based on profit shown in audited financial statements of a profitable year.
- For cash dividends, institutions must ensure sufficient cash reserves, and there should be no restrictions imposed by loan-related conditions on dividend distribution.
This new directive is expected to bring greater discipline to financial institutions and enhance transparency in how profits are distributed or reinvested.
