NRB ask BFI’s to maintain extra 1% buffer capital for distributing cash dividend

Sharesansar, Aug 19:

Nepal Rastra Bank through its directives has asked the bank and financial institutions to maintain extra 1 percent buffer capital for distributing cash dividend to its shareholders and also prohibit to distribute cash dividend from the surplus amount arises from difference of swap ratio.

The new directives have indirectly signaled BFI’s to issue only bonus share and also NRB restrict to distribute cash dividend from share premium account.

This means now “A” class commercial banks need to maintain minimum 11% capital adequacy ratio. Earlier, the minimum capital adequacy ratio for “A” Class financial institutions was 10% set by Nepal Rastra Bank through its unified directives.

Now the minimum capital adequacy ratio for the “B” and “C” class financial institutions needs to be 12 percent for distributing cash dividend which means they have to maintain extra 1 percent capital fund.

 Nepal Rastra Bank also asked the BFI’s to maintain all the surplus amount (arises from difference in swap ratio) in capital adjustment fund. BFI’s are prohibited to distribute cash dividend from this surplus amount which means now BFI’s can used such amount only for distributing bonus share.

The new directives has made difficult for many commercial banks having capital adequacy close to 11 percent for distributing cash dividend. Now option left them is only to distribute bonus share.