The State Bank of Pakistan (SBP) has allowed disbursement of dividend to those banks, which Board of Directors (BoD) has approved dividends for the March 2020 quarter before April 22, 2020.
On Wednesday, via circular issued on BPRD/BA &CPD/006315/20, the SBP asked the bank/DFI/MFB to suspend the distribution of dividends for March and June 2020 quarters.
The SBP had taken this step with a view to conserving capital and further enhancing the lending and loss absorption capacity and accordingly bank/DFI/MFB were advised to suspend distribution of profits by way of declaring dividends in any manner (cash or stock) for the quarter ending March 31, 2020 and half year ending June 30, 2020.
Banks were also advised to place this directive before BoD and if board considers that it is necessary to declare the dividend, the bank may approach the SBP with sound justifications for consideration of request on merit.
However, after issuance of this circular, the SBP realized that a number of banks have already announced dividends, then the SBP issued another directive via BPRD/BA &CPD/006315-2/20 and allowed disbursement of dividend to those banks, which Board of Directors has already approved dividends for the March 2020 quarter before April 22, 2020.
According to SBP, it has been observed by State Bank that the BoD of a few banks had already approved the dividend for the March 2020 quarter, before the receipt of the SBP's instructions.
Therefore, these instructions are partially modified and now the banks which have approved the dividends for the March 2020 quarter, on or before April 22, 2020, are allowed to implement the dividend payout decision taken by their respective Boards. However, in lieu thereof, these banks will not declare dividend for the September 2020 quarter.
Further, the disbursement suspension condition will not apply on stock dividend, the circular said.
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