In a fresh move Bangladesh Bank has put an upper limit on dividends declared by banks and non-bank financial institutions (NBFIs) for maintaining better liquidity to offset the economic impacts of Covid-19.
The central bank has decided to increase by 5.0 percentage points the maximum ceiling of dividend offered by banks to the shareholders while no NBFI will be able to disburse more than a 15 percent cash dividend.
As per the new decision, the banks would now be able to declare maximum 35 per cent dividend from the existing level of 30 per cent, said a BB official.
NBFIs with a below 10 percent capital adequacy ratio and an above 10 percent non-performing loans (NPL) ratio will not be able to announce a dividend.
Any NBFI with an above 10 percent NPL ratio will require BB's permission to disburse dividends, according to a circular of the central bank.
Meanwhile, NBFIs which availed the facility of provisioning deferral from the BB can announce at best 5 percent stock dividend with prior approval from the bank.
"The central bank in a recent meeting have decided to increase the maximum limit of dividend to be announced by the banks for 2020 after holding necessary consultation with the stakeholders concerned," said BB's chief spokesperson Mohmmad Serajul Islam.
He said that such steps have been taken for maintaining better liquidity in financial sector considering the impacts of Covid-19 that cast a severe blow to the overall economic activities across the country.
The BB's decision came after it assured the Bangladesh Securities and Exchange Commission (BSEC) of taking steps in this regards.
BSEC executive director and spokesperson Mohammad Rezaul Karim said earlier that the central bank agreed to raise dividend limit of the listed banks to 35 per cent.
Under the existing provision, the banks having capacity to keep 15 per cent or more in capital reserve against all risk-weighted assets, including 2.5 per cent capital conservation buffers, will be allowed to provide 30 per cent dividend, including 15 per cent cash dividend, according to a notification, issued by the BB, on February 07.
Rezaul Karim said that they had discussion with the BB on various issues for the development of the stock market and money market along with strengthening their mutual coordination.
He said that the circular issued earlier allowed the listed banks to pay a maximum of 30 per cent dividend.
BB restricted dividends by commercial banks in 2020 and in 2021 the restriction is announced to remain there until further notice.
The board of directors of listed NBFIs recently recommended 35 per cent cash dividends out of their record profit for 2020.