NRB to Review Dividend Cap Policy for Microfinance Institutions

Nepal Rastra Bank (NRB) has announced that it will review the existing policy that restricts microfinance institutions from distributing more than 15% annual dividends (cash or bonus). This was declared by NRB Governor Dr. Vishwanath Paudel during the unveiling of the Monetary Policy for the fiscal year 2082/83, his first policy statement since assuming office.

According to point number 104 of the new monetary policy, “The current provision allowing microfinance financial institutions to distribute annual dividends (cash or bonus) up to 15% will be reviewed.” This indicates that the central bank may consider raising or adjusting the existing cap instead of scrapping it altogether.

This potential revision comes in response to long-standing demands from the microfinance sector to remove the 15% cap, arguing that it limits shareholder returns. Analysts believe the central bank is more likely to increase the dividend limit rather than reduce it, in line with its broader approach of adopting flexible monetary measures.

If the cap is increased, it would benefit shareholders of microfinance companies and could also boost investor interest in microfinance stocks, giving a positive momentum to the capital market.

The move is seen as part of NRB’s broader flexible policy direction aimed at encouraging growth and strengthening financial institutions in a sustainable manner.