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The Bangladesh Bank on Monday said that non-bank financial institutions would be allowed to issue up to 30 per cent dividend to their shareholders.
Of the dividend, highest 15 per cent can be issued as cash dividend and the rest 15 per cent as stock dividend.
The central bank came up with the clarification after its February 24, 2021 circular faced criticisms from the stock market investors.
In the February 24, 2021 circular, the BB had mentioned that the NBFIs would be allowed to issue highest 15 per cent cash dividend to their investors.
The circular neither mentioned the stock dividend limit nor specified whether the NBFIs would be allowed to issue any stock dividend, creating confusion among the investors.
To clarify the issue, the Bangladesh Securities and Exchange Commission on March 15 placed the issue along with the dividend ceiling specified in the BB’s dividend policy issued on February 7, 2021 to the central bank.
The central bank on March 16 raised the dividend issuance ceiling for banks to 35 per cent from 30 per cent.
Earlier on February 7, the BB imposed a 30-per cent ceiling on banks’ dividend issuance to strengthen the entities’ capital base, making compliance with the rules mandatory from the year ended on December 31, 2020.
In the circular, the central bank tagged banks’ dividend declaration capacity with the entity’s capital base so that the banks can save them from sudden hike in non-performing loans along with playing a vital role in the economic revival amid the COVID-19 outbreak.
To tackle the coronavirus-induced challenges, adoption of capital saving and liquidity supportive dividend policy along with cost-efficient management process has become essential, said the February 7 BB circular.
In the BB’s circular on NBFIs’ dividend, the central bank mentioned that the NBFIs which have classified loan ratio more than 10 per cent and capital adequacy ratio below 10 per cent would not be allowed to declare any dividend.
The NBFIs which are taking deferral facility from the central bank for their provisioning deficit will not be allowed to declare dividend until the deferral is over, it said.
But, in such cases, with permission from the central bank a maximum 5 per cent stock dividend could be allowed, said the circular.
