The Bangladesh Bank on Thursday imposed strict conditions on dividend payouts, limiting most banks’ ability to distribute dividends.
In a circular issued on the day, the central bank outlined revised policies for dividend distribution, considering the overall financial health of the banking sector, depositor protection, and investor returns.
The policy will apply to the dividends declared for the financial year ending on December 31, 2025.
Cash dividends can only be paid from the current year’s profits and not from accumulated profits of previous years.
Banks must have no outstanding penalties or unpaid fines related to shortfalls in Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR).
The ratio of classified loans and investments must not exceed 10 per cent of total loans and investments.
There should be no shortfall in provisioning against loans, investments, and other assets.
Banks availing deferral facilities from Bangladesh Bank for provisioning or other expenses cannot declare dividends while such facilities remain active.
Banks that fully comply with the conditions may declare dividend amount not exceeding 30 per cent of the paid-up capital in terms of the Dividend Payout Ratio.
Banks with a minimum capital adequacy ratio of 15 per cent, including a 2.5 per cent capital conservation buffer, may distribute dividends up to 50 per cent, provided that their post-dividend capital adequacy does not fall below 13.5 per cent.
Banks with capital adequacy between 12.5 per cent and 15 per cent may distribute dividends up to 40 per cent, ensuring their post-dividend capital adequacy remains above 12.5 per cent.
Banks with capital adequacy below 12.5 per cent but above the minimum required 10 per cent can only issue stock dividends.
According to Bangladesh Bank officials, many banks, especially Shariah-based ones, are already failing to meet these conditions and may be unable to declare dividends in the coming years.
In response to the economic pressures caused by the Covid-19 pandemic, the central bank had introduced regulations in 2021 to ensure strong capital reserves and liquidity maintenance in the banking sector.
The latest circular updates those policies, maintaining strict conditions on dividend distribution to uphold financial stability.
Banks must comply with sections 22 and 24 of the Banking Companies Act, 1991 (as amended till 2023) and related regulatory guidelines issued by Bangladesh Bank.
Those declaring dividends under this policy must submit a report to the central bank within seven days, signed by their managing director or CEO.
Bangladesh Bank officials stated that the move aims to reinforce financial discipline while balancing shareholder interests and regulatory compliance.
