Bangladesh Bank has assured bankers of considering a plea to extend the exemption by one more year of provisioning against the losses they incurred through investing in the capital market in 2010.
The central bank would take the decision in this regard and inform the bankers soon.
At the bankers meeting in Dhaka yesterday, the bankers demanded of the central bank to extend the exemption so they could offer increased dividend for the shareholders.
The present exemption expires on December 31, and thereafter, the banks will have to adjust the provision shortfall in four quarters.
The bankers also demanded allowing banks to offer cash dividend to the shareholders now prohibited as a pre-condition of the exemption.
“We want to maintain provision in four instalments next year against the loss incurred from share market investment in 2010,” said Association of Bankers Bangladesh (ABB) President Ali Reza Iftekhar. If the provision requirement is relaxed, the dividend capacity of banks will increase, he added.
Earlier, the banks were given the provision facility on condition that they cannot declare cash dividends.
“But we seek to declare cash dividend in line with the same provision facility.”
Bangladesh Bank will come up with a decision about it within several days, said Iftekhar.
He said the share market exposure of some banks increased beyond the limit of 10% of their capital due to spike of index in recent times. But no banks have been found to have invested further exceeding the limit.
The central bank further reminded banks of reducing their excess investment gradually within the limit.
Banks had been running with huge loss in the share market portfolio since the market crash in 2010, said a senior executive of a private bank.
He said the investment that went through merchant banks is accounted for a majority of loss.
The dividend declaration capacity of banks fell gradually in last three years due to loss in stock market investment portfolio.
Banking sector investors experienced marginal dividend during the period while they saw highest dividend declaration in this sector in the bubble market in 2009.
