RBI proposes banks with less than 6% net NPAs to declare dividends

The Reserve Bank on Tuesday proposed allowing banks having net non-performing assets (NPAs) ratio of less than 6 per cent to declare dividends.
As per the prevailing norms last updated in 2005, banks need to have a NNPA ratio of up to 7 per cent to become eligible for declaration of dividends.
“The net NPA ratio, for the financial year for which the dividend is proposed, shall be less than six per cent,” the Reserve Bank said in the draft guidelines on dividend declaration.
The guidelines have been reviewed in the light of implementation of Basel III standards, the revision of the prompt corrective action (PCA) framework, and the introduction of differentiated banks, the RBI said.
The central bank has proposed that the new guidelines should come into effect from FY25 onwards.
The draft lays down directions need to be followed by banks’ boards while considering proposals of dividend payouts, which include consideration on divergence in classification and provisioning for NPAs as ..