Around 30 commercial banks in Bangladesh have effectively been barred from paying dividends in 2025 due to their deepening crisis of capital erosion, provisioning shortfalls and mounting non-performing loans that exposes severe stress across the country’s banking sector.
The restriction signals a widening deterioration in balance sheets, where hidden loan losses are now surfacing after years of aggressive and often poorly assessed credit expansion.
A senior central bank official told this correspondent that rising bad loans, inadequate provisioning and unchecked lending growth have pushed multiple banks into dividend ineligibility under Bangladesh Bank’s prudential framework.
The affected institutions include major state-owned and private banks such as Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, BASIC Bank, Bangladesh Development Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, IFIC Bank, AB Bank, One Bank, United Commercial Bank, Premier Bank, National Bank, EXIM Bank, Social Islami Bank, First Security Islami Bank, Union Bank, Global Islami Bank, NRBC Bank, NRB Bank, Standard Bank, SBAC Bank, Padma Bank, Meghna Bank, Bangladesh Commerce Bank, ICB Islamic Bank, Citizens Bank, Modhumoti Bank and Islami Bank Bangladesh PLC.
Under Bangladesh Bank rules, no bank is permitted to declare dividends if it carries provisioning gaps, fails to meet capital adequacy requirements or remains non-compliant with regulatory directives " effectively turning dividend distribution into a direct barometer of financial health rather than a routine corporate decision.
Banking sector insiders say the crisis has been building quietly over several years.
“These banks expanded lending aggressively during periods of excess liquidity, often without adequate risk assessment,” the central bank official said on condition of anonymity. “Large corporate exposures, group-based lending and politically influenced credit decisions significantly weakened underwriting discipline.”
When repayment pressures began to mount, many banks opted to restructure or reschedule loans instead of classifying them as defaults. While this temporarily masked stress in the system, it also delayed the recognition of deteriorating asset quality.
As a result, a significant portion of bad loans remained hidden in balance sheets, creating an illusion of stability while underlying credit risk continued to worsen.
The real shock came when Bangladesh Bank tightened its supervisory stance and enforced stricter loan classification and provisioning requirements.
Previously restructured or repeatedly rolled-over loans were reclassified, forcing banks to make large, immediate provisions against expected losses. In many cases, these provisioning requirements exceeded annual profits, wiping out earnings and leaving no scope for dividend distribution.
Industry analysts say this regulatory tightening has effectively forced long-suppressed losses into the open.
By enforcing capital adequacy norms and full provisioning discipline, the central bank has accelerated the exposure of weaknesses that had accumulated over years of regulatory forbearance and delayed corrective action.
The outcome is a broad-based dividend freeze affecting both state-owned and private commercial banks, signalling that the problem is not confined to isolated institutions but reflects a systemic erosion of asset quality across the sector.
Financial sector observers warn that unless banks urgently improve recovery of defaulted loans, strengthen provisioning buffers and raise fresh capital, dividend capacity will remain severely constrained in the medium term.
For shareholders and investors, the development marks a stark shift " from routine dividend expectations to a new reality where payouts are now strictly tied to balance sheet integrity and regulatory compliance.
The message from the regulator is increasingly clear: dividends can no longer be declared on paper profits, but only on genuinely sound financial foundations.
