The board of Laxmi Bank took the decision after NRB barred the bank from dividend distribution.
The NRB move comes after the bank failed to comply the central bank’s Capital Adequacy Ratio (CAR) provision.
As per NRB provision, banks that fail to meet CAR ratio in any given month of FY will be barred from dividend distribution.
Laxmi Bank had maintained primary CAR of 8.48 percent in the month of Bhadra. As per NRB, the minimum CAR should be 8.50 percent.
In the last FY, the bank earned Rs 1.25 billion in distributable profit. Based on this, it has above 10 percent dividend distribution capability. However, its shareholders will be left empty handed due to its negligence toward the provision.
As per Dev Dhakal, Executive Director of NRB Supervision Department, banks that fail to maintain the capital adequacy ratio in any month of the FY will not be allowed to distribute dividend.
What about Machhapuchchhre and NIC Asia Bank?
Another two banks which have not met the capital adequacy ratio are NIC Asia Bank and Machhapuchchhre Bank.
NIC Asia Bank failed to maintain CAR in first and second quarter. In the first and second quarters of the last FY, it had CAR of 7.30 and 7.80 percent respectively. Thus, the bank will not be allowed to distribute dividends by NRB.
The bank had a distributable profit of Rs 2.24 billion in the last FY, thus, the bank could distribute 19.42 percent dividend to its shareholders. Moreover, the bank had not distributed any dividends in the last FY, therefore, it had enough funds in its reserve to distribute dividends.
Similarly, Machhapuchchhre Bank had 8.02 percent CAR in the first and 8.09 percent in the second quarter of the last FY. The bank has Rs 1.32 billion in distributable profit, thus, it can distribute 13 percent dividend to its shareholders.
Since the last FY, the CAR of many banks was under immense pressure as the banks aggressively expanded their businesses. However, except for Laxmi, NIC Asia and Machhapuchchhre Bank, other banks were able to meet the CAR.
