Restriction on dividend disbursement by 15 banks

Courtesy of Financial Express 

The central bank has decided to create a new window for investment through imposing restriction on disbursement of dividends by 15 private commercial banks (PCBs).

Under this decision, the net profit from banks' operations in capital market can be kept as retained earnings, not to be disbursed among the shareholders in form of either cash or bonus shares. But the banks can invest such fund in the capital market, if they desire.

The PCBs are: AB Bank Ltd, Al-Arafah Islami Bank Ltd, City Bank Ltd, Dhaka Bank Ltd, IFIC Bank Ltd, Mercantile Bank Ltd, Mutual Trust Bank Ltd, National Bank Ltd, NCC Bank Ltd, Prime Bank Ltd, Premier Bank Ltd, Pubali Bank Ltd, Southeast Bank Ltd, The Trust Bank Ltd and Uttara Bank Ltd.

"These banks had a substantial volume of investment in the shock market," a senior official of the Bangladesh Bank (BB) told the FE Monday, adding that the banks will be empowered to disburse the dividend only after the lifting of such a restriction.

He also said such fund will help the banks to consolidate their capital base that may be used for stabilising the country's capital market.

The central bank of Bangladesh took the decision on Monday against the backdrop of a debacle in the country's capital market.

The BB official said the banks' exposures to the capital market have come down within the limit of 10 per cent as per section 26 (2) of the Banking Companies Act 1991 due to proper supervision and monitoring of the central bank.

Under the provisions of this Act, banks are allowed to invest not more than 10 per cent of their total liabilities in the capital market.

"Our allout cooperation for maintaining sufficient liquidity in the market will continue," the BB official said, adding that the central bank is closely monitoring the overall money market situation.