Three leading NBFCs may not pay dividends this year

KOLKATA: LIC Housing Finance, Mahindra & Mahindra Financial Services and Shriram Transport Finance would not be eligible to pay dividend if they have to comply with the capital adequacy and asset quality parameters for the last three years, as Reserve Bank of India said in a draft dividend distribution guideline for non-bank lenders.Most non-banking finance companies (NBFCs) are comfortably placed so far excluding the three mentioned above, if the guidelines are made applicable from the previous year, Kotak Institutional Securities said in a note."We await the final set of guidelines and implementation timelines on the same," the note said.RBI said NBFCs would be eligible to pay dividend if they have capital adequacy above 15% and net non-performing assets ratio below 6% for the last three years, including the year for which the dividend is proposed.The regulator said the dividend payout would be capped at 50%.The rules are to come into effect for the financial year beginning April 1, 2020 while asset quality for every lender may take a hit this fiscal due to the economic downturn amid Covid-19 pandemic. Rating company ICRA said for housing finance companies, meeting the capital adequacy criteria would be relatively easier given the lower risk weights on the large part of their portfolio. The net NPA criteria specified for NBFCs may not be a constraint for HFCs to pay out dividends as well considering the low NPAs for the segment currently. Kotak's note to investors however mentioned that LIC Housing Finance would not be eligible for its low capital adequacy while the other two entities suffer from high net NPAs above 6%.RBI is likely to tighten regulations for large and systemically important NBFCs further.

from Economic Times https://ift.tt/3m33rUM
via IFTTT