Bonus Policy Disparity Sparks Intense Banking Sector Controversy

A newly introduced dual incentive bonus policy in Bangladesh’s banking sector has ignited widespread discontent and intense debate among industry stakeholders. By instituting separate bonus frameworks for state-owned and private commercial banks, questions have emerged over fairness, transparency, and regulatory equilibrium. Bankers and economists have cautioned that applying divergent standards within the same sector could undermine staff morale and potentially jeopardise overall financial stability.

According to guidelines issued by the Financial Institutions Division of the Ministry of Finance, state-owned banks are now permitted to grant incentive bonuses even in loss-making years, provided certain criteria are met. The directive specifies that net profits will be calculated after accounting for provisions for loans and advances, investment-related provisions, and revaluation of other assets. Bonuses will then be determined based on performance indicators derived from these adjusted profits, with an individual employee eligible for a maximum of three distinct bonuses.

Significantly, the Ministry retains discretionary authority to approve at least one bonus for state banks even if formal conditions are not fully satisfied. This policy has been extended to cover the financial year 2024, a move that has provoked sharp criticism among private sector banks, who perceive it as an uneven playing field.

By contrast, the bonus framework for private banks, as stipulated by Bangladesh Bank, is considerably more stringent. No bonus may be awarded without genuine net profit. If capital adequacy or statutory reserve levels fall below prescribed thresholds, bonuses are entirely withheld. Temporary regulatory relaxations, loan rescheduling, or suspended provisions cannot be factored into bonus calculations.

Historically, private banks relied on retained earnings to distribute bonuses, but this practice has effectively been halted under the new rules. To qualify for bonuses, private institutions must demonstrate progress in recovering classified or written-off loans and improvements in key banking performance indicators. Failure to meet these benchmarks results in complete forfeiture of bonus entitlements.

Industry insiders warn that this dual policy is likely to dampen morale among employees in private banks. While state-owned banks retain the flexibility to grant bonuses despite capital shortfalls, profitable private banks remain constrained. Financial analysts fear that the longstanding tradition of year-end bonuses could be disrupted, leaving only a handful of strong private banks capable of rewarding their staff. Such a scenario may adversely affect overall employee motivation and the broader banking environment in Bangladesh.