No Major Change in Dividend Rules: Investor Keshav Koirala ‘Kaka’

Kathmandu – Nepal Rastra Bank (NRB) yesterday issued a revised procedure on dividend approval for banks and financial institutions. Commenting on the update, prominent stock market investor Keshav Koirala, popularly known as ‘Kaka,’ said that there are no significant regulatory changes in the new directive.

According to him, for Class “A” commercial banks and national-level Class “B” development banks, there has been no change in the rules regarding dividend distribution. They will continue under the same provisions as before when distributing bonus or cash dividends.

For regional Class “B” development banks and Class “C” finance companies, the old rule requiring them to allocate only enough cash dividends to cover the tax on bonus shares remains intact. However, under the revised procedure, these institutions are now required to distribute more cash dividends than just the tax portion.

The most notable provision applies to Class “D” microfinance institutions. If a promoter shareholder holds more than 25% of the institution’s shares, they will no longer be entitled to receive bonus or cash dividends. Instead, such dividends will be deposited directly into the concerned microfinance institution’s account. Other shareholders, however, will not be affected by this provision.

Koirala emphasized that the revision mainly serves as an update and that the overall dividend distribution framework remains largely unchanged.