KATHMANDU – Despite posting a total net profit of Rs 280 million, Prabhu Bank has not distributed a single rupee in dividends to its investors over the past two fiscal years. However, during the same period, CEO Ashok Sherchan personally earned over Rs 80 million from the bank.

Prabhu Bank’s shares, listed on the Nepal Stock Exchange (NEPSE), are currently trading at less than Rs 200 per unit. Although listed companies typically share annual profits with their investors through dividends, Prabhu Bank has excluded its shareholders from this benefit for two consecutive years.

Instead, the bank’s management, particularly CEO Sherchan, has continued to receive large pay packages. Despite the bank’s weak performance and inability to provide dividends, Sherchan’s earnings have remained unaffected. According to the bank’s annual reports, while investors received zero returns in FY 2079/80 and FY 2080/81, Sherchan earned over Rs 80 million in total compensation.

In FY 2079/80, Sherchan took home Rs 40.7 million, including Rs 29.6 million in salary, Rs 6.45 million as employee bonus, and Rs 4.57 million in Dashain and leave allowances. In FY 2080/81, he earned another Rs 39.4 million, comprising Rs 31.2 million in salary, Rs 3.53 million in bonuses, and Rs 4.67 million in allowances.

These figures highlight a stark contrast: while the bank’s total net profit in FY 2079/80 was Rs 280 million, more than Rs 40 million was spent solely on the CEO’s compensation. Similarly, in FY 2080/81, with a reported net profit of Rs 510 million, Sherchan’s pay remained above Rs 40 million.

This has raised concerns over executive compensation amid poor company performance. The Nepal Rastra Bank (NRB), the central bank, has conducted studies indicating that CEOs of some banks receive excessive remuneration despite underperforming. NRB’s findings have led to suggestions that executive salaries, bonuses, and benefits should be reviewed and potentially reduced, particularly in commercial banks like Prabhu with low performance indicators.

Dividend History Paints a Grim Picture

The last time Prabhu Bank offered dividends was in FY 2078/79 — a modest 8%, which included 6.5% in bonus shares and only 1.5% in cash dividends. Since then, shareholders have seen no return. Many banks in Nepal use bonus shares to inflate paid-up capital without affecting their cash flow — a method often employed to sidestep the inability to issue cash dividends.

Despite Rs 23.54 billion worth of listed shares, Prabhu Bank’s shareholders have not been prioritized in recent years. Observers also point to risky lending practices under Sherchan’s tenure, including the disbursement of Rs 2 billion in loans allegedly under the name of his father-in-law, without adequate collateral.

Conclusion

With continued underperformance, no dividends for shareholders, and substantial payouts to executives, Prabhu Bank’s governance and executive compensation practices are under increasing scrutiny. Investors, regulators, and financial analysts are now questioning whether such discrepancies in profit-sharing are sustainable or ethical in Nepal’s banking sector.