The majority of commercial banks that have declared dividends for the current fiscal year (FY 2023/24) have reduced the rates, with some opting not to pay dividends at all.

The decline in banks' profitability last fiscal year, attributed to low credit growth, reduced income, and rising non-performing loans (NPLs), has impacted dividend payouts, according to industry experts and banking representatives.

As of now, 11 commercial banks have decided to distribute dividends from their profits of FY 2023/24, while five have decided not to distribute any. Of the banks announcing dividends, seven have reduced their rates compared to the previous year.

Himalayan Bank, Machhapuchhre Bank, NMB Bank, Rastriya Banijya Bank, and Prabhu Bank have announced they will not distribute dividends from the profits of the last fiscal year. Among these, Machhapuchhre Bank had distributed a total of 14% in dividends last year, including 13.3% in bonus shares and 0.7% cash. Similarly, Rastriya Banijya Bank had provided a 5.5% cash dividend. Himalayan Bank, NMB Bank, and Prabhu Bank did not pay dividends last year either.

Himalayan Bank’s CEO, Ashoke Rana, cited the merger with the financially troubled Civil Bank as a major reason for its inability to distribute dividends for two consecutive years. Civil Bank, which was merged into Himalayan Bank on February 24, 2023, had a 27% NPL ratio at the time of the merger.

"We had to allocate significant funds for provisioning, which affected profitability and, consequently, the ability to distribute dividends," Rana explained. Civil Bank was promoted by Ichcharaj Tamang, who is currently in jail for cooperative fraud.

Everest Bank, Nabil Bank, Global IME Bank, Laxmi Sunrise Bank, Sanima Bank, Citizens Bank, and Siddhartha Bank have reduced their dividend rates this year.

Standard Chartered Bank, however, bucked the trend, increasing its dividend rate compared to the previous year. The bank has announced a total dividend of 25.5%, including 6.5% in bonus shares and 19% in cash, from last year’s profits.

Nepal SBI Bank also marginally increased its dividends, offering a total of 10.65% this year, compared to 10.55% last year. This year’s payout includes 3.8% in bonus shares and 6.85% in cash.

Prime Commercial Bank, which did not declare dividends last year, has announced a 5% cash dividend this year. Similarly, the state-owned Krishi Bikas Bank, which also refrained from dividends last year, has declared a total of 10.53% dividends, comprising 3% in bonus shares and 7.53% in cash.

Nepal Investment Mega Bank, Kumari Bank, Nepal Bank, and N.I.C. Asia Bank are yet to announce dividends from last year’s profits.

Former banker Analraj Bhattarai explained that banks' declining capacity to pay dividends is primarily due to their inability to collect interest on loans, which has adversely impacted their income.

"Additionally, provisioning for bad loans significantly affected profits," Bhattarai said. The provisioning for commercial banks reached Rs 201 billion in FY 2023/24, up from Rs 147 billion in the previous fiscal year.

"Some banks may have reserved profits without distributing dividends," Bhattarai added, indicating a cautious approach by banks amid challenging economic conditions.