Lumbini Development Bank Shareholders to Receive No Dividend
23rd December 2025, Kathmandu
Lumbini Development Bank Limited which is one of the prominent national level development banks in Nepal has recently announced a major decision regarding its profit distribution for the previous fiscal year. In a move that has captured the attention of the investment community and shareholders alike the board of directors has officially decided not to distribute any dividends for the fiscal year twenty eighty one twenty eighty two. This decision comes at a time when the entire banking sector in Nepal is facing significant challenges due to a sluggish economy and rising loan defaults. For investors who were hoping for a cash return or bonus shares this news serves as a reminder of the current financial pressures within the development banking industry.
Null Dividend Lumbini Bank
The formal decision was made during a meeting of the board of directors held on Poush seven in the year twenty eighty two. This meeting was critical as it finalized the financial statements of the bank for the fiscal year that ended in mid July twenty twenty five. According to the notice published by the bank the board resolved to approve the audited financial reports and move forward without any dividend proposal. These financial statements will now be submitted to the central bank known as Nepal Rastra Bank for final regulatory approval. Once the central bank reviews the reports and provides its consent the bank will then present these findings to its upcoming annual general meeting for the shareholders to observe.
To understand why Lumbini Development Bank decided against a dividend it is essential to look at the financial performance of the institution over the last several quarters. According to the latest reports the bank has been struggling with a decline in profitability. In the first quarter of the current fiscal year twenty eighty two twenty eighty three the bank reported a significant net loss of approximately three hundred forty eight million rupees. This loss follows a period where the net profit for the previous fiscal year twenty eighty one twenty eighty two had already seen a sharp decline of over thirty percent compared to the year before that. When a bank experiences such a dip in earnings its capacity to share profits with investors is naturally restricted as it must prioritize its capital adequacy and financial stability.
One of the primary factors contributing to this situation is the rise in non performing loans. For Lumbini Development Bank the ratio of non performing loans reached four point fifty five percent by the end of the last fiscal year which was a notable increase from the three point twenty nine percent reported previously. An increase in such loans means that a larger portion of the bank capital must be set aside as provisions for potential losses. These provisions are mandatory under the strict directives issued by Nepal Rastra Bank. As more funds are diverted toward these safety reserves the amount of profit available for distribution to shareholders shrinks significantly. In many cases even if a bank reports an operating profit the regulatory adjustments for bad loans can push the distributable profit into negative territory.
The broader economic context in Nepal has also played a role in this decision. The domestic market has seen a slowdown in credit demand and a decrease in the repayment capacity of borrowers across various sectors including real estate and retail. Because development banks are closely tied to these sectors they often feel the impact of economic cycles more acutely than larger commercial banks. Lumbini Development Bank is not alone in this trend as several other development banks have also refrained from announcing dividends this year. In fact out of the sixteen development banks currently listed on the Nepal Stock Exchange only a small handful have been able to offer dividends to their investors for this fiscal period.
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For the shareholders of Lumbini Development Bank this news might be disappointing but it reflects a cautious and responsible approach by the management. By retaining earnings and not distributing cash or bonus shares the bank can strengthen its balance sheet and improve its capital base. This is crucial for maintaining the trust of depositors and ensuring that the bank can continue its operations smoothly in a volatile market. The paid up capital of the bank currently stands at approximately three point sixty two billion rupees and maintaining this capital at healthy levels is a priority for regulatory compliance.
The next steps for the bank involve waiting for the feedback from Nepal Rastra Bank. The central bank has the authority to review the financial health of the institution and can suggest changes to the financial statements if it believes that the provisions for bad loans are insufficient. Only after this rigorous vetting process can the bank hold its annual general meeting. During the annual general meeting the board will explain the current challenges to the shareholders and outline the strategy for the upcoming months. The focus will likely be on improving loan recovery and reducing the ratio of non performing assets to return to a path of profitability.
In the secondary market the share price of Lumbini Development Bank has already reflected the changing sentiments of investors. As of late December twenty twenty five the shares were trading at around four hundred eighty nine rupees. While some investors look for immediate dividend gains others view the bank long term stability as a more important factor. The decision to skip dividends this year is a strategic move to ensure that the bank remains resilient. It also allows the institution to focus on its core goal of providing financial services to its customers across its network while navigating the current economic headwinds.
In conclusion the decision by Lumbini Development Bank to provide no dividend for the fiscal year 2081/82 is a direct result of the financial and regulatory environment in Nepal. With rising loan defaults and a reported loss in the most recent quarter the bank is prioritizing its survival and stability over short term rewards for investors. As the financial statements head to Nepal Rastra Bank for approval the market will be watching closely to see how the bank manages its recovery in the new year.
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