A significant number of banks in Bangladesh may not be able to declare dividends this year due to high levels of defaulted loans, according to the latest regulatory provisions of Bangladesh Bank.
Under the central bank's policy, any bank with non-performing loans (NPLs) of 10 per cent or more at the end of the accounting year will be barred from declaring dividends, regardless of how much profit it records. The calculation will be based on financial data available at the close of the fiscal year.
As of the end of December of the last accounting year, 29 public and private sector banks reported defaulted loans in double digits. This figure represents nearly half of the country's total scheduled banks. Among them, 17 banks listed on the capital market are expected to be unable to distribute dividends this year due to high levels of loan defaults.
In addition to the NPL threshold, banks with capital shortfalls or provision deficits have also been restricted from declaring dividends since last year. As a result, several banks were unable to pay dividends in the previous financial year as well.
To strengthen the financial stability of the banking sector, Bangladesh Bank introduced the policy titled "Policy for Declaring Dividends Against Shares" on March 13 last year. The policy was implemented during the tenure of Dr. Ahsan H. Mansur as governor of the central bank.
Bangladesh Bank has been tightening regulations on dividend distribution since the COVID-19 pandemic in 2020. At that time, certain temporary measures allowed banks to classify loans as regular even when instalments were not collected, prompting the regulator to impose restrictions on dividend payments to maintain financial discipline.
Previously, restrictions mainly applied to banks that sought deferrals or additional time to maintain required provisions. However, for the 2025 financial year, Bangladesh Bank has introduced several new conditions, expanding the regulatory framework governing dividend declarations. These measures are aimed at strengthening banks' capital bases and ensuring greater stability in the financial sector amid growing concerns over rising defaulted loans.
According to Bangladesh Bank policy, regardless of how much profit a bank makes, if its classified loan rate is 10 per cent or more, it cannot pay dividends. Even if there is any resource deficit-including provisions, penalty interest, or fines due to CRR and SLR shortfalls-dividends cannot be paid. A bank can only pay cash dividends from the net profit of the relevant accounting year. Dividends cannot be paid from accumulated profits under any circumstances. Moreover, banks cannot distribute dividends at will simply because they have made a profit. A maximum dividend of 30 per cent of paid-up capital or 50 per cent of net profit may be distributed. After the BNP-led government took office, businessman Mostaqur Rahman was appointed governor. However, no change has been made to the dividend distribution policy, and no objections have been raised by banks so far.
Financial statements are generally required to be finalised within a maximum of four months after the end of an accounting year. Alongside dividends, rules for employee incentive bonuses have also been tightened. However, banks have sought relaxation of this rule. The bank entrepreneurs' organisation BAB recently requested the governor to allow incentive bonuses for employees even if a bank fails to make a net profit. Bangladesh Bank has not yet officially announced any decision on this matter.
According to Bangladesh Bank, the interim government has brought forward the actual picture of non-performing loans. As a result, NPLs in the banking sector rose to about 36 per cent in September. However, due to enhanced recovery efforts and special redeposit facilities, NPLs declined to Tk 5,57,217 crore by the end of December, accounting for 30.60 per cent of total loans.
There are currently 61 scheduled banks in the country, of which 36 are listed on the capital market. However, Sammilito Islamic Bank was formed by merging five banks, which are still listed separately on the capital market. Due to high defaulted loans, 17 of these banks will not be able to pay dividends this year.
Of the nine state-owned banks, only Rupali Bank is listed on the capital market. The bank has defaulted loans amounting to Tk 19,631 crore, or 41.58 per cent of its total loans. Defaulted loans of all other state-owned banks are also in double digits. Among them, Janata Bank has the highest, with Tk 72,152 crore or 74 per cent of its total loans.
