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Rupali Bank is set to nearly double its paid-up capital after receiving regulatory approval to issue Tk 6.80 billion worth of ordinary shares to the government by converting accumulated share money deposits into equity.

In a disclosure on Monday, the state-owned bank said the Bangladesh Securities and Exchange Commission (BSEC) had approved the issuance of 453.3 million ordinary shares at Tk 15 each, comprising a Tk 10 face value and a Tk 5 premium.

The new shares will be allotted to the secretary of the Finance Division under the Ministry of Finance against funds previously injected into the bank to strengthen its capital base.

The conversion does not involve any fresh government funding. Instead, accumulated share money deposits—funds received for shares that had not yet been issued—will be converted into equity, improving the bank’s capital structure.

Following the share issuance, Rupali Bank’s outstanding shares will increase from about 488 million to around 941 million, while its paid-up capital will rise from Tk 4.88 billion to Tk 9.41 billion.

Market analysts said the move would strengthen the bank’s capital position but dilute the ownership and earnings per share (EPS) of existing shareholders unless profitability improves significantly.

The government’s stake, currently 90.19 per cent, is expected to increase, while the holdings of institutional investors (3.17 per cent) and general shareholders (6.64 per cent) will decline proportionately.

The conversion follows a 2020 directive from the Financial Reporting Council (FRC), which asked state-owned entities to convert accumulated share money deposits into equity so that government investments are properly reflected in their capital structure.

Several listed state-owned companies, including Titas Gas, Power Grid Bangladesh, Dhaka Electric Supply Company and Bangladesh Submarine Cable Company, have already carried out similar conversions.

Investors reacted positively to the announcement, with Rupali Bank’s share price rising 0.59 per cent to close at Tk 17.10 on the Dhaka Stock Exchange on Monday.

Profitability remains under pressure

Despite the capital strengthening, Rupali Bank continues to face significant financial challenges due to rising non-performing loans and weak earnings.

The bank reported a consolidated loss of Tk 3.96 billion in the January-March quarter of this year, compared with a profit of Tk 66 million in the same period last year.

According to the bank, the loss was mainly caused by negative net interest income, as interest paid on deposits exceeded interest earned from loans amid rising funding costs and weak loan recovery.

The bank’s annual net profit has also declined sharply over the past three years, falling from Tk 627 million in 2023 to Tk 114 million in 2024 and further to Tk 68 million in 2025.

Although the bank remained profitable last year, it did so despite a Tk 140 billion provisioning shortfall, supported by regulatory forbearance from Bangladesh Bank.

The lender did not declare dividends for 2024 and 2025 because of the provisioning deficit, resulting in its downgrade to the Z category on the stock market in May.

Under Bangladesh Bank’s dividend policy, banks that fail to maintain required loan-loss provisions or rely on provisioning deferrals are barred from paying dividends. From 2025, banks with classified loans exceeding 10 per cent of total outstanding loans are also prohibited from declaring dividends, regardless of profitability.