The Bangladesh Bank’s decision not to disburse more than 30 percent dividends among shareholders will bring a catastrophe to the capital market, experts opined.
In a statement on Monday, the central bank suspended the payment of cash dividends by the commercial banks until September 30 this year in order to increase the fund flow due to the ongoing novel coronavirus pandemic.
Economist and former finance adviser to a caretaker government AB Mirza Azizul Islam said, “I do not understand the reason why Bangladesh Bank has taken this decision.”
“The situation is not the same in all banks. It may not be reasonable to foist condition of minimum or maximum dividend,” he said adding that, “I don’t think, the central bank has taken the right decision.”
Islam said, “Bangladesh Bank can monitor or check whether a bank is declaring dividends within its financial capacity.”
“Such conditions should not be imposed. This will definitely have a negative impact on the stock market, he mentioned.
Another eminent economist and market expert Prof Abu Ahmed told The Bangladesh Post, “It is a very bad decision for capital market which is taken by the central bank. If banks don’t declare cash dividend or more dividend, many investors won’t show interest to invest in capital market.”
Even, many banks have already declared more 30 percent dividend. As a result, many investors brought shares of those banks, he said adding that, if banks now reduce dividend from they declared earlier, many investors will face huge loss.
An investor of stock market Abdul Mannan said, “Investors are upset with the BB decision as they are going to face huge losses for buying more banking share, expecting higher cash dividend.”
"If the listed banks don't disburse cash dividend, how will we get returns from the capital market at a time when stock prices are falling?" he asked.
A director and former president of Dhaka Stock Exchange (DSE) Shakil Rizvi said the central bank's decision was not good for the stock market.
“Several banks have already declared dividends. Now they have to fix it again,” he mentioned.
Rizvi also said, “The central bank could take such decision earlier.”
This is part of the lack of coordination among regulatory agencies, he said adding that, the central bank should need discussed with regulators to take such a decision.
A central bank official said the capital market investors will be losers for the time being, but they will get back their returns eventually as the decision will strengthen banks' health.
“But postponing dividend until September might have a negative impact on the share prices,” he added.