Declaration of dividends by banks

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..... delines permitted banks to declare dividends subject to a ceiling of 33.33% on the dividend payout ratio, without obtaining the prior approval of RBI, subject to the fulfilment of the laid down criteria. 2. On the basis of the experience gained, it has been decided to grant general permission to banks to declare dividends , subject to compliance with the guidelines laid down below: 3. Eligibility criteria for declaration of dividend Only those banks, which comply with the following minimum prudential requirements, would be eligible to declare dividends: i. The bank should have: CRAR of at least 9 % for preceding two completed years and the accounting year for which it proposes to declare dividend. Ne .....

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..... t ratio shall be computed after excluding such extra-ordinary items for reckoning compliance with the prudential payout ratio. iii. The financial statements pertaining to the financial year for which the bank is declaring a dividend should be free of any qualifications by the statutory auditors, which have an adverse bearing on the profit during that year. In case of any qualification to that effect, the net profit should be suitably adjusted while computing the dividend payout ratio. iv. For 2004-05 if the Investment Fluctuation Reserve is less than 4% of securities included in the HFT AFS categories, the dividend payout ratio shall be computed with respect to the Adjusted Net Profit. [Adjusted Net Profit = Net Profit ({ .....

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..... ANNEX 1 Matrix of Criteria for maximum permissible range of Dividend Payout Ratio Category CRAR Net NPA Ratio Zero More than zero but less than 3% From 3 % to less than 5% From 5% to less than 7 % Range of Dividend Payout Ratio A 11% or more for each of the last 3 years Up to 40 Up to 35 Up to 25 Up to 15 B 10% or more for each of the last 3 years Up to 35 Up to .....

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..... 2002-03 V 12 11 11 2.3 A Up to 35 W 12 10 11 3.8 B Up to 20 X 11 9 10 6.2 C Up to 5 Y 9 8 10 4.2 D Up to 5 Z 12 .....

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