Govt Tightens Bonus Policy for State-Owned Banks and Financial Institutions
The government has introduced stricter guidelines on incentive bonus payments for employees of state-owned commercial banks, specialized banks, and financial institutions to ensure financial discipline and transparency.
According to the new policy, bonuses must now be based on net profit, not operating profit. Banks and financial institutions will be required to first pay dividends to the government before becoming eligible to disburse employee bonuses. Failure to comply with this condition will disqualify the institution from issuing any bonuses, regardless of profitability.
Bangladesh Bank Governor Ahsan H. Mansur announced on September 6 that any bank with capital adequacy below 10% or that suffers from provision shortfalls will be barred from paying both dividends and bonuses. He also reiterated that loans unpaid for more than three months will be considered non-performing loans (NPLs).
Following this, the Financial Institutions Division under the Ministry of Finance drafted new bonus guidelines for 14 state-owned banks and financial institutions. The policy aims to standardize bonus practices and prevent irregularities that have plagued the sector in recent years.
Under the revised framework:
- Net profit will be calculated by deducting provisions from operating profit.
- Approval from the Financial Institutions Division will be required to offer any additional bonus beyond the set guidelines.
- The guidelines will be applicable starting from the 2024 bonus cycle.
Despite existing rules, past violations have been noted. For instance, Sonali Bank awarded five bonuses in 2023, although the previous policy capped bonuses at three. Although the government ordered the return of excess bonuses in March 2024, none have been repaid.
Performance-Based Bonus Criteria
The six state-owned commercial banks — Sonali, Agrani, Janata, Rupali, BASIC, and BDBL — will now receive bonuses based on five performance indicators:
- Net profit ratio on working capital
- Deposit growth
- Growth in loans and advances
- Recovery rate of defaulted loans
- Recovery rate of written-off loans
The net profit ratio will carry the most weight in bonus determinations. Banks scoring high will be eligible for up to three bonuses (each equivalent to one month’s basic salary), while underperformers may receive fewer or none.
For six specialized banks — Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank (RAKUB), Karmasangsthan Bank, Palli Sanchay Bank, Probashi Kalyan Bank, and Ansar-VDP Bank — the bonus will be based on four indicators, excluding deposit growth.
Investment Corporation of Bangladesh (ICB) and Bangladesh House Building Finance Corporation (BHBFC) will be evaluated on separate performance indicators. ICB’s metrics include stock market transaction growth, net profit, investment dividends, and recovery of defaulted loans. For BHBFC, the focus will be on loan repayment performance, net profit, recovery of defaulted loans, and loan growth.
Objective: Restore Fiscal Discipline
The revised bonus policy comes amid broader efforts by the government to enforce fiscal discipline in state-run financial entities. Officials believe the new rules will help curb misuse of public funds and link employee incentives more directly to institutional performance.
