Regulators reject Rupali Bank’s dividend
Rupali Bank is facing hurdles over disbursing dividends among its shareholders as the listed state-owned bank did not get the harmonic go-ahead from its two regulators.
In May, the state-owned bank proposed to give a 2% stock dividend for 2021 but the Bangladesh Securities and Exchange Commission (BSEC) rejected the proposal citing consequential pains for its shareholders.
Then the bank converted the dividend into cash at its annual general meeting just to be rejected again by the Bangladesh Bank as it did not comply with the cash dividend disbursement conditions.
To overcome the obstacle, the bank has once again turned to the BSEC seeking its approval to stock dividends.
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No official of the state-run bank agreed to comment in this regard.
However, the Dhaka Stock Exchange (DSE) has taken into account shareholders' consent to pay cash dividends in the bank's annual general meeting.
Also, the stock exchange shows on its website that the bank has already paid a 2% cash dividend to its shareholders for 2021.
And the country's premier bourse transferred the bank shares from the "A" category to the "B" category as it failed to pay a minimum of 10% dividends.
According to the new rules, if a company fails to pay cash dividends for two consecutive years, its shares will be traded in the "Z" category.
A DSE official said on condition of anonymity that there are complications over changing the category of Rupali Bank shares. A decision will be made regarding this next Sunday.
BSEC sources say the bank has increased its paid-up capital by 140% in the past decade through disbursing stock dividends. General investors have suffered as the shares lost their value as a result.
Again, the financial weaknesses of the lender did not end and therefore, the commission did not approve the stock dividend, they added.
And cash dividends cannot be given if there is a shortfall in provisioning against defaulted loans. Therefore, the Bangladesh Bank also did not approve the cash dividend, the sources said.
Rupali Bank's required provision against its classified loans is Tk5,135 crore. But it has a provision of only Tk2,064 crore which means the bank has a provision deficit of Tk3,078 crore.
At the end of 2021, the bank's total defaulted loans stood at Tk6,666 crore, which is 18.84% of the total loans disbursed. In 2021, the bank's defaulted loans increased by 68% compared to the previous year, according to its audited statement.
Metro Spinning also faces a similar problem
Textile sector company Metro Spinning Mills Ltd, has also had complications with its dividends. The company had proposed a stock dividend of 5% for the fiscal 2020-21 but the BSEC did not approve that proposal. And the company has not yet paid any dividend for that year as a result.
An executive, wishing not to be named, said the commission's decision came after the stock dividend was approved in the annual general meeting.
"It has created a complication. If we want to change the decision of dividend again, we have to hold a meeting afresh. A general meeting cannot be held twice in one accounting year. Therefore, we sought BSEC's advice on what to do in this regard," he added.
According to a commission official, the company's board of directors collectively failed to hold a 30% stake when it recommended the stock dividend.
"Therefore, the stock dividends were not approved as per the law. Now, they have fulfilled this condition. And the commission is working on the dividend payment of the company," he added.
