The Bangladesh Bank (BB) circular on salaries of private sector bank officials at the entry-level, issued a couple of weeks back, came all of a sudden. Both bank owners and bankers became surprised, although a salary structure for the officials and employees has been long overdue.
In its January 20 circular, the central bank asked the private banks to fix the minimum salaries of their entry-level officers serving the general and cash sections and lower-level employees.
As expected, the BB move did not go well with the sponsor-directors of private banks. The Association of Banks, Bangladesh (ABB) and some top officials of private banks met the high-ups of the central bank to discuss the issue. Following that meeting, the BB amended its earlier directive to offer some temporary relief to the fourth generation banks.
The ABB's worries centring around the BB directive are, however, not without a reason. Banks have been passing through a difficult time like all other enterprises since the pandemic started its onslaught on the economy in March 2020. Had not the central bank relaxed the loan classification rules, most banks would have faced a far harder time. The rise in administrative costs following the implementation of the new BB directive on salaries and wages of entry-level officials and lower-level employees might cut the banks' profit further.
There is, however, another side of the coin. Some private sector banks, unlike the state-owned banks, do not have a uniform pay structure for their officers and employees. There is a disparity in both inter-bank and intra-bank salaries and allowance disbursement. As mentioned in the BB circular, there is an eye-soring gap in the pay packages of top and lower-level bank officials.
It is nothing surprising that first or second-generation banks would pay better than their later versions. But the gap is so big that it proves to be demoralising for officials of the third and fourth generation banks. What is more disturbing is that some new banks do not have any well-defined pay scales for their officials and employees. It depends on the sweet will of the management to give or not to give increment annually. Allowances are given at different rates.
The central bank's latest move to fix the minimum salary for entry-level officials will fulfil only a small part of a large void. What is needed most is a uniform salary structure for the full-time officials and employees of private banks. The officials who would be employed on a contractual basis may be exempted from it. But a limit to the number of such officials a bank would hire also needs to be fixed.
What the banks need to lure brilliant young people is an attractive salary structure. This appears important because of the latest change in attitude among young people towards a banking career. Some years back, educated youths were found more interested in taking up banking as a career. Now they are trying hard for government jobs because of better pay and career prospects. Some banks are offering unattractive salaries and allowances to newcomers. It is no denying that employers dictate terms because of the abundant supply of educated people. But taking undue advantage of that will encourage brain drain in the long run.