As NRB tighten cash dividends, banks focus on bonus share

KATHMANDU: As majority of commercial banks have already announced dividend for their shareholders of 2019-20, banks have primarily announced bonus share for shareholders over cash dividend.

As of today, 25 out of 27 commercial banks in the country have already announced dividends for the last fiscal year.

Banks are distributing bonus share over cash dividend especially after the Nepal Rastra Bank (NRB), through the Monetary Policy, tightened cash dividend distribution citing that sufficient capital is needed to revive the economy which has been crippled due to COVID-19.

NRB has made an arrangement in the Monetary Policy that banks and financial institutions will be allowed to declare cash dividend only up to 30 percent of the net distributable profit of as of mid-June 2019. Similarly, the dividend should not be higher than the average interest rate as of mid-June deposits.

As a result, the average interest rate on deposits of commercial banks is less than 6 percent. That is why they have increased the bonus dividend by giving less than 6 percent cash dividend.