Bangladesh Bank’s latest circular on bank dividends has left only BRAC Bank eligible to distribute cash dividends next year, raising concerns among bankers, investors, and market participants.
The central bank barred scheduled banks with paid-up capital below Tk2,000 crore from paying cash dividends. For eligible banks, payouts are capped at 50 per cent of declared dividends, with the remainder to be issued as stock.
Only two banks, BRAC Bank and National Bank, have paid-up capital exceeding Tk2,000 crore. BRAC Bank is fundamentally strong, while National Bank has negative equity exceeding Tk3,500 crore.
Lion City Advisory Director Md Abdullah Al Faisal said the circular exposes the flaw of measuring dividend capacity through paid-up capital instead of actual solvency and equity strength.
“Globally, stability is assessed through capital adequacy ratio (CAR), retained earnings, provisioning, asset quality, and CET1 capital—not merely paid-up capital.”
Selim R F Hussain, former chairman of the Association of Bankers Bangladesh, said over the past decade, many banks paid out cash dividends while hiding weaknesses instead of strengthening balance sheets.
“But I don’t know why the central bank selected only paid-up capital as the sole criterion, when internationally, CAR is standard.”
CFA Society Bangladesh President Asif Khan said that previously, a minimum post-dividend CAR of 12.5 per cent was required.
“For the unusual circumstances of Bangladesh’s banking sector, it could be raised slightly, but tagging dividends to a fixed paid-up capital is inappropriate,” he said.
Stock market groups also raised concerns.
DSE Brokers Association (DBA) President Saiful Islam said 31 listed banks have institutional and retail shareholders depending on annual dividends. Raising the bar arbitrarily bars every bank except one, which is unfair to shareholders.
DBA Senior Vice President Md Moniruzzaman added, “Paid-up capital is a paper-only metric. This should not be the criteria for dividends.
VIPB Asset Management CEO Shahidul Islam compared the move to past arbitrary regulations, saying, “Tk2,000 crore paid-up capital criterion sounds like a coat the central bank is trying to impose on banks with huge differences in balance sheets, profitability, and asset quality.”
Moniruzzaman warned that third- and fourth-generation banks could go dividend-less for years, despite strong fundamentals.
Midland Bank, for instance, with a CAR above 15 per cent, cannot pay dividends due to Tk659 crore paid-up capital, while National Bank, despite Tk3,220 crore paid-up capital, remains blocked due to accumulated losses.
Saiful Islam said that listed banks face punitive Z-category listing if cash dividends are not paid, alongside additional tax if stock dividends are issued. Now, the Bangladesh Bank, in an opposite-direction push, is encouraging stock dividends.
Analysts said a universally accepted criterion of CAR, like before, would suffice if the central bank does not overlook any wrongdoing. Dividends should remain a boardroom decision.”
Bangladesh Association of Banks Vice Chairman Monzurur Rahman said, “I agree with the need to push for bank capitalisation, but paid-up capital alone does not tell the whole story.”
“Many banks with high paid-up capital are struggling to pay back depositors as their funds were looted. Should they pay dividends while fundamentally strong banks with high CAR, efficiency, and profitability cannot?”
Thousands of families depend on dividends, which must be remembered, he added.
The paid-up capital restriction also risks placing City, Prime, Pubali, EBL, Bank Asia, Dutch Bangla, and Jamuna Bank under Z-category unless they raise capital through rights issues or RPO, potentially prompting changes in BSEC’s listing criteria.
Bangladesh Bank, however, said in the circular to be effective from 31 December, the move will strengthen internal capital generation, risk absorption, and resilience.
But market participants caution that arbitrary paid-up capital thresholds cannot substitute for globally aligned regulation and real equity strength.
