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RBI tells commercial and co-operative banks not to declare dividend for FY21

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The Reserve Bank of India (RBI) has asked the commercial and co-operative banks to not declare the dividend for FY21.

RBI tells commercial and co-operative banks not to declare dividend for FY21
The Reserve Bank of India (RBI) has asked the commercial and co-operative banks to not declare the dividend for FY21.
In its bi-monthly monetary policy announced Friday, RBI Governor Shaktikanta Das said that in order to conserve capital and ensuring credit flow, the commercial and co-operative banks will not give out dividends this year and retain all the profits.
"In continuation of this effort and to help banks conserve capital, while creating room for fresh lending, it has been decided after a review that commercial and co-operative banks will retain the profits and not make any dividend pay-out from the profits pertaining to financial year 2019-20," Das said in his policy statement.
RBI projects FY21 real GDP contraction at 7.5%
He added that the RBI will introduce risk-based internal audits in large urban co-operative banks.
Further, to enhance the resilience of NBFCs, the Governor also proposed to put in place criteria and parameters for the declaration of dividends.
"The growing significance of NBFCs and their interlinkages with different segments in the financial system has made it imperative to enhance the resilience of the sector. Therefore, it has been decided to put in place transparent criteria as per a matrix of parameters for declaration of dividends by different categories of NBFCs," he said.
A draft circular containing the proposed criteria and parameters will be released soon for public comments.
Further, he added that the current regulatory regime for the NBFC sector, built on the principle of proportionality, warrants a review.
"It is felt that a scale-based regulatory approach linked to the systemic risk contribution of NBFCs could be the way forward. As part of the stakeholder consultation process, a discussion paper on this subject will be issued before January 15, 2021 for public comments," he said.
Meanwhile, the RBI's Monetary Policy Committee (MPC) kept the repo rate unchanged in the December policy. With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.
The MPC voted unanimously to keep policy rates unchanged.
(This is a developing story)
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