The introduction of separate incentive bonus policies for state-owned and private commercial banks has ignited renewed controversy and unease across Bangladesh’s financial sector, with industry insiders warning of a deepening sense of inequity. Under the newly issued frameworks, state-owned banks may award incentive bonuses to employees even when operating at a loss, subject to certain conditions. In contrast, many private banks, despite posting profits, are likely to be barred from granting similar bonuses owing to a far more stringent set of requirements.
For state-owned banks, the Financial Institutions Division of the Ministry of Finance has issued a detailed directive outlining the criteria for bonus eligibility. According to the guideline, net profit will be calculated after adjusting operating profit against provisions for loans and advances, as well as provisions related to investments and the revaluation of other assets. Based on predefined performance indicators, the amount of incentive bonus will then be determined. Employees of state-owned banks may receive up to a maximum of three incentive bonuses. Notably, even if a bank fails to meet the formal eligibility criteria, the ministry retains the authority to approve at least one incentive bonus on special consideration. The directive will also apply retroactively to bonuses for the year 2024.
By contrast, the policy issued by Bangladesh Bank for private commercial banks is markedly tougher. It clearly stipulates that no incentive bonus may be paid unless a bank earns a “real” net profit based strictly on actual income and expenditure. Any shortfall in capital adequacy or statutory safety reserves will automatically disqualify a bank from awarding bonuses. Furthermore, profits generated through regulatory forbearance—such as rescheduling facilities, delayed provisioning benefits, or temporary regulatory concessions—will not be considered acceptable for bonus purposes. The long-standing practice of paying bonuses from accumulated or retained earnings has also been explicitly prohibited.
The central bank’s policy further requires visible progress in the recovery of classified and written-off loans, alongside demonstrable improvements across key banking indicators. Failure to meet these benchmarks will result in a complete bar on incentive payments, regardless of other considerations.
Traditionally, incentive bonuses have amounted to the equivalent of one month’s basic salary. In previous years, both public and private banks have paid as many as seven such bonuses annually. In some extreme cases, individual executives reportedly received incentive payouts exceeding Tk 200 million. In response to these excesses and allegations of irregularities, Bangladesh Bank had earlier imposed restrictions through a series of circulars—measures that have now been significantly tightened for private banks.
Several senior officials from private banks, speaking on condition of anonymity, expressed frustration over what they described as a clear policy imbalance. They noted that many state-owned banks continue to suffer from severe capital and reserve deficits, yet are still permitted to reward employees. Meanwhile, private banks that manage deficits through conditional adjustments and later return to profitability are being denied similar flexibility. Once the new rules come fully into force, they warned, incentive bonuses in most private banks will effectively cease.
Industry observers also point out that many banks customarily pay incentive bonuses soon after the close of the financial year. The new directives are expected to disrupt this practice significantly. Analysts fear that, going forward, only a handful of financially strong private banks will be able to offer incentive bonuses, a development that could undermine employee morale and adversely affect the overall climate of the banking sector.