The Bangladesh Bank has imposed stricter regulations on private banks regarding the disbursement of staff incentive bonuses, signalling a decisive shift in banking governance. Under the new directive, no bank will be allowed to provide incentive bonuses unless it achieves actual net profit. This measure also applies if a bank faces shortfalls in capital or statutory reserves, or relies on delayed regulatory reliefs; in such cases, bonus payments will be strictly prohibited.
Industry insiders suggest that the ruling is likely to halt bonuses for the majority of private banks, at least temporarily. The central bank issued the circular on Tuesday, citing concerns that some institutions have been manipulating earnings to justify bonus payouts, which undermines sound financial management and effective banking practices.
The circular emphasises that bonuses must now be based solely on realised net profits, excluding any form of accrued or projected profits. Furthermore, banks with regulatory capital deficits or reserve shortfalls are barred from granting bonuses, even if the central bank has approved temporary relief measures.
Bangladesh Bank also highlighted that, for bonus eligibility, banks must demonstrate tangible progress in classified and written-off loan recovery, along with measurable improvement across key banking performance indicators.
For state-owned banks, the 2025 guidelines titled “Incentive Bonus for Employees of State-Owned Commercial and Specialized Banks and Financial Institutions” remain mandatory.
Banking officials note that, historically, many banks have awarded bonuses immediately after the fiscal year-end or have used various discounts and accounting adjustments to inflate profits for bonus purposes. With the new directives, only those institutions genuinely performing well will be able to reward their staff. As a result, employees of top-performing banks will benefit, while others may see their expected incentives withheld until compliance and genuine profitability are verified.
Key Implications of Bangladesh Bank Directive:
| Criteria for Bonus Eligibility | Requirement/Condition | Impact on Banks |
|---|---|---|
| Net Profit | Must be based on actual earnings, not projected or accrued | Bonuses only for genuinely profitable banks |
| Capital Adequacy | No shortfalls allowed | Banks with capital deficits cannot issue bonuses |
| Statutory Reserves | Must be maintained; no bonus if deficient | Ensures financial stability |
| Regulatory Reliefs | Delayed reliefs cannot be used for profit calculation | Prevents manipulation |
| Loan Recovery & Performance | Visible improvement required | Aligns bonuses with operational efficiency |
With this move, Bangladesh Bank aims to ensure financial discipline, transparency, and responsible incentive practices across the banking sector. Observers predict a more sustainable banking environment, rewarding merit and authentic performance rather than accounting adjustments.