State-owned banks asked to follow performance metrics to curb bonus abuse
Performance will be assessed on a 100-point scale, says new govt directive
Highlights:
- State-owned bank staff can get up to three performance-based bonuses yearly
- Bonuses will be tied to net profit, not operating profit
- Move aims to stop indiscriminate bonus payouts
- Sonali Bank gave five bonuses in 2023, breaching rules
- Staff scoring under 40 points won't qualify for bonuses
- Bonus payments need board and ministry approval
Employees of state-owned commercial banks, specialised banks and financial institutions will now receive incentive bonuses based strictly on performance, with a maximum of three bonuses allowed per year.
According to a new directive issued yesterday by the Financial Institutions Division of the finance ministry, the criteria for awarding bonuses will now be based on net profit, rather than the previous practice of using operating profit.
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Officials at the Financial Institutions Division told TBS that the move is intended to end the indiscriminate distribution of bonuses that had become common practice.
In recent years, several banks breached the earlier policy, with Sonali Bank paying out five incentive bonuses in 2023 despite the cap being three, said the officials.
Although the ministry later instructed the recovery of two bonuses from employees, sources at Sonali Bank confirmed the money was never returned, they said, adding that other banks are also believed to have paid excessive bonuses.
Under the new rules, six state-owned commercial banks – Sonali, Agrani, Janata, Rupali, BASIC and BDBL – will award bonuses on the basis of five performance indicators: Net profit ratio on working capital, growth of deposits, growth of loans and advances, recovery rate of default loans, and recovery of written-off loans.
A similar system will apply to specialised banks such as Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Karmasangsthan Bank, Palli Sanchay Bank, Probashi Kallyan Bank and Ansar-VDP Unnayan Bank.
The Investment Corporation of Bangladesh will also follow five criteria, though with some adjustments, including dividend and capital gains on investments and trading performance in the capital market.
For the House Building Finance Corporation, the indicators will focus on net profit on working capital, actual loan recovery rate and growth in loans and investments.
Bonus scale
Performance will be assessed on a 100-point scale. Employees scoring below 40 points will not be eligible for a bonus. Those scoring 40-50 will receive one month's basic salary as a bonus, 50-60 will qualify for 1.5 months, 60-70 for two months, 70-80 for 2.5 months, and scores above 80 will merit the maximum three months' salary.
The final month's basic salary of the financial year will be used as the reference for calculating bonuses.
Approval process
Under the new rules, commercial banks will disburse bonuses with the approval of their boards of directors, while specialised banks and financial institutions must secure the endorsement of their boards and obtain final approval from the Financial Institutions Division.
In cases where an institution fails to qualify for bonuses under the performance criteria, the guidelines allow for an ex gratia payment equivalent to one month's basic salary, subject to board recommendation and approval by the Financial Institutions Division, if the institution demonstrates exceptional achievements in the year.
