Kathmandu. The government has decided to withhold the distribution of cash dividend and bonus share dividend to banks and financial institutions until they sell their cross holdings in other licensed banks and financial institutions.

Nepal Rastra Bank (NRB) has made this provision while issuing the Working Procedure- 2082 BS relating to granting consent to publish financial statements and approving dividends for the purpose of annual general meeting of licensed banks and financial institutions.

Nepal Rastra Bank (NRB) has said that it will stop the distribution of cash dividend and bonus shares received by the institutions dealing in savings and loans established in accordance with the prevailing laws other than the Banks and Financial Institutions Act, 2073 BS until the completion of the sale of the investment made in the founder shares of the licensed banks and financial institutions. However, in the case of ‘D’ class licensed institutions, this provision will not be applicable when the shares are already in place.

Although the licensed organization has not been able to maintain the minimum capital fund in the prescribed ratio during any period between any financial year, it will not be allowed to declare and distribute cash dividend and bonus shares at the end of the same financial year on the basis of the minimum capital fund in the prescribed ratio.

Similarly, it has been said that it will not be allowed to declare or distribute cash dividend and bonus shares in case such action is not lifted by the end of the financial year to the date of taking approval of the Annual General Meeting.

According to the Capital Education Framework 2015 for the purpose of declaring cash dividend by the licensed institutions of class ‘A’ and the licensed national level development banks of the ‘B’ category, and the infrastructure development banks for the purpose of declaring cash dividend, the amount of cash dividend proposed after reducing the amount of cash dividend proposed after reducing the amount of cash dividend, on the basis of common equity tier 1 ratio with supervisory adjustment and after reducing the amount of proposed cash dividend. It has been said that only if the primary capital and capital fund or more is maintained, it will be allowed to declare or distribute cash dividend.

According to the NRB, licensed banks and financial institutions will not be able to declare and distribute dividends beyond the prescribed limit from the net distributable profit of the financial year if there is a limit on the declaration and distribution of dividends. In order to ensure that there is no ambiguity in calculating the distributable profit, there will be no obstacle in calculating the total distributable profit for this year by adding the distributable profit accumulated from the years before this year in this year’s profit.

Rastra Bank will prohibit banks÷ financial institutions from declaring and distributing cash dividends other than tax purposes of bonus shares of that fiscal year, which cannot maintain the average interest rate difference on a monthly basis as prescribed by the Rastra Bank.

After five years from the date of operation of the transaction and after issuing general shares, the bank and financial institution will withhold the cash dividend or bonus shares distributed by the bank and financial institution to such shareholders until the loan is repaid.

If the paid-up capital of the institution to be formed after the merger or acquisition is less than the total sum of the paid-up capital of the institutions involved in the merger or acquisition, then the amount (savings) that will differ in the paid-up capital will have to be accounted for in the capital reserve fund. It said it would not allow shareholders to distribute cash dividends from such funds.