Dividend limit set at 30% for non-bank financial institutions

Non-bank financial institutions (NBFIs) will be able to declare the highest dividend of 30% for shareholders, with a maximum of 15% cash dividend.

On Monday, the Bangladesh Bank issued a circular in this regard.

Earlier on February 24, the central bank set a cash dividend limit of 15% for NBFIs but did not say what percentage they would be able to pay, including stock dividends.

The central bank in its latest circular said the extent of the declaration of dividends has been clarified considering the overall aspect. Apart from this, other instructions of the circular issued on February 24 will remain unchanged.

The February 24 circular said that NBFIs which are taking advantage of the deficit adjustment from the central bank will not be able to declare cash dividends. However, with the approval of the central bank, it will be able to pay a 5% stock dividend.

In addition, institutions with a classified loan of more than 10% will not be able to pay any dividend without the approval of the central bank.

Again the institutions that have a classified loan of more than 10% but a capital adequacy ratio (CAR) of less than 10% will not be able to pay dividends.

Shareholders had been calling for setting the limits as financial institutions did not clear the issue of dividend declaration. Besides, they demanded an increase in dividends by banks.

In addition to these demands, a meeting was held on March 15 with the Bangladesh Securities and Exchange Commission (BSEC) and senior officials of the Bangladesh Bank to reduce the lack of coordination.

At the same meeting, the dividend limit of banks was increased from 30% to 35%. Of this, 17.5% is cash dividend and the rest is a stock dividend.

This time the limit of NBFIs' dividend declaration has been clarified. Arif Khan, managing director of IDLC, welcomed the initiative.

He told The Business Standard that there was a kind of ambiguity with the dividend declaration as the matter was not clear before.