NRB Tightens Rules: No Dividends for Promoters Holding Over 25% in Microfinance

The Nepal Rastra Bank (NRB) has imposed stricter rules on promoter shareholders of microfinance companies. Under the newly issued “Procedure for Approving Financial Statements and Dividend Distribution of Banks and Financial Institutions, 2082”, promoters holding more than 25% of paid-up capital in a microfinance institution will not be eligible for dividends.

The central bank replaced the previous 2077 procedure with this updated regulation. As per the new rules, promoter investors in “Class D” institutions (microfinance) can hold up to 25% of paid-up capital, while in other microfinance institutions, the limit is 10%. Any holdings above these limits must be reduced; until then, cash or bonus share dividends will be withheld.

Similarly, NGOs converted into microfinance companies must also bring their promoter shareholding within the prescribed limit within five years of starting financial operations. Failure to comply will result in NRB blocking dividend distribution.

In addition, development banks and finance companies (excluding national-level ones) can only announce and distribute cash dividends if they maintain a minimum Tier-1 capital ratio of 6.5% and Capital Adequacy Ratio (CAR) of 11% after such distribution.