KATHMANDU: Nepal Rastra Bank has issued ‘Guidelines on Dividend Distribution for Institutions Licensed to Conduct Payment-Related Activities, 2082’.

The guidelines have been issued with the aim of making dividend distribution transparent and systematic, informed Kiran Pandit, Executive Director of Nepal Rastra Bank. The central bank has made new arrangements with the aim of making the distribution of earned profits and dividend distribution more transparent and systematic.

It is believed that the implementation of the guidelines will make the distribution and reinvestment of profits earned by institutions more effective, increasing the risk-bearing capacity and efficiency of the concerned institutions, and supporting the development of a safe, healthy, and efficient payment system.

A policy on dividend distribution should be formulated and implemented based on the guidance of the Central Bank. Such a policy should be approved by the Board of Directors.

Details of the organization’s plan and priorities regarding maintaining regulatory capital, policies on cash dividends and share dividends, and the licensed institution should arrange for a risk-bearing fund and a reserve fund.

A certain percentage of profits should be allocated to such funds and the amount of the said fund can be used to manage losses arising from unexpected events. Details of the expenditure made from the fund should be informed to the Central Bank.

According to the guidelines, payment system operators will have to set up an infrastructure development fund and deposit a certain percentage of their profits into the fund. The funds from such a fund can be spent on expanding the organization’s infrastructure.

While declaring dividends, the company should declare dividends only on the basis of the financial statements of the year in which the retained earnings are not negative and the company is in profit. While declaring cash dividends, it is stated that there should be sufficient cash balance and no loan-related conditions should restrict the distribution of dividends.