BM Desk: The Bangladesh Bank has implemented strict regulations regarding how banks can distribute dividends. Consequently, the amount of dividends will be determined by assessing the banks’ profits, the interests of the shareholders, and their financial standing.

Under the new guidelines, the declared dividend amount will not exceed 30 percent of the paid-up capital.

Every year, private banks provide cash and stock (bonus) dividends to their shareholders. However, this year, due to the financial pressures faced by the banking sector in Bangladesh, banks must thoroughly evaluate their financial condition before distributing dividends as per the new policy.

Dividend distribution conditions:

Profit: Banks can only pay cash dividends from their annual profits. No dividends can be paid from old profits.

Defaulted loans and investment rates: Banks whose defaulted loans or investment rates are more than 10 percent will not be able to pay dividends.

Safety reserve deficit: Banks that have a safety reserve deficit will not be able to declare dividends.

Capital conservation buffer: Banks that maintain less than 15 percent of their capital against risky assets will be able to pay a limited amount of dividends.

Bangladesh Bank has determined through this policy that banks that are able to maintain 15 percent of their capital after maintaining safety reserves and other expenses will be able to pay dividends according to their ability. However, the dividend payout ratio for those banks will not exceed 50 percent.

Moreover, banks that have a safety reserve deficit and other expenses will be able to declare only stock dividends.

Bangladesh Bank stated that in the past, there were many banks that declared large profits despite making losses and still paid large dividends. Thus, the financial base of the banks has become more fragile, which is harmful to the country’s economy.

A representative from Bangladesh Bank announced that alongside enhancing digital payments in the country, banks ought to focus on decreasing cash usage. An application named ‘Binimoy’ has been introduced, allowing for seamless inter-bank transactions. This policy is set to be implemented during the dividend declaration for the ongoing fiscal year concluding on December 31, 2025, and adherence to this regulation will be required starting next year.