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Government's finance authority asks the central bank to make fresh 'incentive-bonus rules' for state-owned banks (SoBs) as most of them reportedly handed out such perks sans making profit.
The Bangladesh Bank received the instruction from the Financial Institutions Division (FID) for framing a set of new rules with updated information and submit it soon.
The directive came Monday from a committee meeting at the FID which was formed to determine whether the officials of the SoBs are entitled to get incentive bonuses when the banks are incurring losses every year.
FID additional secretary ABM Ruhul Azad presided over the meeting, attended by representatives from the finance division, the central bank, SoBs, and state-owned financial institutions.
The meeting discussed that the central bank had prepared an 'incentive bonus rule' for the SoBs back in December 2014 which now needs to be updated before taking a decision to determine the number of incentive bonuses for SoB officials.
The meeting also elicited information from the participants about the provisions and rules followed by the individual banks in providing such perks called incentive bonus.
In June this year, the central bank in a letter to the FID pointed out that loss-incurring SoBs had been disbursing incentive bonus to their employees every year in violation of rules.
The regulator also requested the FID to take measures against the delinquents.
Some leading SoBs are paying up to three incentive bonuses annually while some others paying one.
No banks were following the unified rules prepared by the central bank even more than six years after their formulation.
According to the rules, the employees should get incentive bonus based on the net profit to be made by the respective institution, and they should not get any if banks fail to make profit.
The rules also provide for fixing the incentive bonus based on a bank's net profit, only after making necessary provision against the classified loans and other soured assets, and when the liquidity position would remain at a satisfactory level.
According to statistics as on December 31, 2019, out of six SoCBs, five incurred a cumulative loss of Tk 192.63 billion that year. Only Bangladesh Development Bank Ltd (BDBL) had registered profit without taking the provisioning waiver.
Sonali Bank, Agrani Bank, Janata Bank and Rupali Bank disbursed Tk 4.373 billion to their employees in incentive bonuses despite incurring a cumulative loss of Tk 185 billion in 2019.
However, providing incentive bonus to employees by Basic Bank remained suspended since 2013 following the unearthing of a massive loan scam in it.
The incentive bonus also remained suspended in state-owned specialised banks -- Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank -- since fiscal year 2018-19 as the banks were counting losses continuously.
Statistics up to December 31, 2020 showed that of the six SoCBs, only Sonali Bank and BDBL could earn net profit.
Agrani Bank and Rupali Bank also showed net profit in 2020 while keeping a provisioning shortfall of Tk 13.19 billion and Tk 8.22 billion respectively.
On the other hand, Janata Bank incurred a loss of Tk 50.54 billion that year while Basic Bank Tk 3.66 billion.
In the year 2020, five SoCBs, save BDBL, had a cumulative shortfall of Tk 137.05 billion.
Until December 2020, the volume of classified loans in the banking sector had stood at Tk 882.83 billion. Almost half of the amount belongs to the six SoCBs.