RBI bars UCBs from paying past dividends

22 Apr 2009

1

The Reserve Bank has barred urban cooperative banks from paying dividend for more tan one year at one go. Banks cannot also pay any unpaid part of a dividend in a future year, RBI said.

"The dividend shall not be cumulative - dividend missed in a year will not be paid in future years, even if adequate profit is available and capital requirements are adequate," RBI said in a directive, adding, "When dividend is paid at a rate less than the prescribed rate, the unpaid amount will not be paid in future years."

The RBI also issued revised guidelines on managing risks and code of conduct in outsourcing of financial services by all commercial banks, except RRBs.

Accordingly, ''Regular audits by either the internal auditors or external auditors of the bank should assess the adequacy of the risk management practices adopted in overseeing and managing the outsourcing arrangement, the bank's compliance with its risk management framework and the requirements of these guidelines.''

Banks should at least on an annual basis, review the financial and operational condition of the service provider to assess its ability to continue to meet its outsourcing obligations. Such due diligence reviews should highlight any deterioration or breach in performance standards, confidentiality and security, and in business continuity preparedness.

Banks have been further advised to submit an annual compliance certificate giving the particulars of outsourcing contracts, the prescribed periodicity of audit by internal / external auditor, major findings of the audit and action taken through board, to the chief of banking supervision in Mumbai.

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