November 29: Nepal Rastra Bank (NRB) has reduced the limit on issuing dividends by microfinance companies.

Issuing the Unified Directives on Monday, the central bank has made arrangements for microfinance companies to issue dividends up to 30 percent of the paid-up capital

If the microfinance companies are to distribute dividends of more than 20 percent, the NRB has instructed those companies to maintain at least 50 percent of the dividend amount in their reserve funds.

The dividend could be both cash or bonus shares.

Two years ago, the central bank had issued a directive allowing microfinance companies to distribute cash dividends of only up to 30 percent of their net distributable profits citing Covid-19 crisis.

The microfinance companies were permitted to distribute cash dividends not exceeding the weighted interest rates on their deposits.

As per the same directive, microfinance companies were not allowed to issue cash dividends if the net distributable profit is less than 5 percent of the paid-up capital.

The central bank took such measures after the microfinance companies, whose primary objective is to serve the poor and marginalized people, were criticized for making excessive profit.