Disquiet has intensified across Bangladesh’s banking industry following the introduction of separate incentive bonus frameworks for state-owned and private commercial banks. The move has reignited debate over fairness, consistency and regulatory balance, with bankers and analysts alike warning that the imposition of divergent standards within the same sector could undermine staff morale and threaten broader financial stability.
Under directives issued by the Financial Institutions Division of the Ministry of Finance, state-owned banks have been granted scope to award incentive bonuses even when operating at a loss, subject to certain conditions. According to the guidelines, net profit may be calculated after adjusting for provisions against loans and advances, investment-related provisions, and the revaluation of other assets. Once this adjusted profit figure is determined, bonus payments are to be fixed on the basis of pre-defined performance indicators. An individual employee may receive up to three incentive bonuses under this system.
Most notably, the ministry has retained discretionary authority to approve at least one bonus for a state-owned bank even if it fails to meet the stipulated eligibility criteria, citing “special consideration”. The policy will also be applied retrospectively to bonuses for the 2024 financial year, a provision that has drawn particular criticism from private-sector bankers.
In sharp contrast, the policy framework issued by Bangladesh Bank for private commercial banks is markedly more stringent. It clearly states that no incentive bonus may be paid unless a bank records a genuine net profit based strictly on actual income and expenditure. Any shortfall in capital adequacy or statutory safety reserves results in an outright prohibition on bonuses. Profits generated through loan rescheduling, deferred provisioning benefits, or temporary regulatory forbearance are explicitly excluded from consideration.
Furthermore, a long-standing practice among private banks—paying bonuses from accumulated or retained earnings—has now been discontinued. The central bank has also imposed additional conditions, requiring visible progress in the recovery of classified and written-off loans, as well as measurable improvements across key banking performance indicators. Failure to meet these benchmarks will trigger a complete ban on bonus payments, regardless of other achievements.
Traditionally, incentive bonuses have been equivalent to one month’s basic salary. In the past, both state-owned and private banks have paid as many as seven bonuses annually. Allegations that senior executives in some institutions received bonuses amounting to tens of millions of taka had earlier prompted Bangladesh Bank to issue restrictive circulars—controls that have now been tightened further for private lenders.
Several senior executives of private banks, speaking on condition of anonymity, have described the dual policy regime as deeply discouraging. They argue that many state-owned banks continue to suffer from chronic capital and reserve deficits, yet remain eligible for bonuses, while private banks that manage to return to profitability through conditional adjustments are denied similar flexibility.
Financial analysts caution that the long-established practice of paying bonuses soon after the close of the financial year may collapse. As a result, only a handful of strong private banks may retain the capacity to offer incentives, potentially eroding employee motivation and exerting a negative influence on the overall banking environment.