Will the banks be able to distribute dividends from the amount recovered by mid-October?

Aug 21, 2020 02:31 PM Merolagani

Commercial banks have not been able to recover a large amount of debt at the end of the last FY. However, Nepal Rastra Bank, the central bank of Nepal has allowed the banks to calculate the recovered amount by mid-October in their profit.

Nevertheless, the general public is concerned whether the bank will be able to pay dividends to investors from the interest earned until mid-October.

The central bank has clarified that when the banks can calculate the interest in their profit, they can also distribute dividends from the profit.

In the last FY, the net profit of most banks has declined while their distributable profit also declined by 33 percent. Consequently, the dividend to be distributed by the banks to their shareholder will decline.  The banks have a capacity of distributing an average of 11 percent dividend on the basis of distributable profit earned by the banks in the last FY. Given that the banks can distribute dividend by the recovered amount till mid-October, the dividend rate might increase to some extent.

According to Anil Sharma, CEO of Nepal Bankers Association, banks have a receivable amount of nearly Rs 11 billion. Due to the deadline extended by NRB for loan repayment, the commercial banks could not collect the amount at the end of the last FY. The amount will add up to the income of the bank once they are recovered in mid-October.

"As the banks can calculate the interest recovered by mid-October in the last year’s income, dividend can be distributed from that amount as well,”  Sharma said.

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