The Bangladesh Bank has introduced stringent restrictions on the payment of incentive bonuses by private banks, marking a decisive move to tighten financial discipline within the sector. Under the new directive, no bank will be allowed to award incentive bonuses to its employees unless it records a genuine net profit. Banks with deficiencies in capital reserves or statutory safety buffers will also be barred from issuing such bonuses.
Industry insiders suggest that, as a result, a significant number of banks may be unable to release incentive bonuses this year, potentially affecting thousands of employees.
Key Conditions Set by Bangladesh Bank
The central bank issued the circular on Tuesday, highlighting several irregularities observed in recent years. According to the notice, some banks have been showing inflated or artificial income to justify the disbursement of bonuses, despite weak financial positions. Bangladesh Bank stated that such practices undermine financial governance, distort bank management practices, and pose risks to overall sector stability.
To counter this trend, the new regulation mandates that incentive bonuses may only be paid if a bank achieves net profit based strictly on its actual income and expenditure. Furthermore, bonuses cannot be sourced from accumulated profit reserves.
Bonus Eligibility Conditions
| Condition | Requirement |
|---|---|
| Net Profit | Must show real net profit based on genuine income-expenditure calculation |
| Use of Accumulated Profit | Prohibited for bonus payments |
| Capital Adequacy | No regulatory capital shortfall |
| Statutory Safety Reserve | Must not have deficit in required provisions |
| Deferred Provision Facility | Banks utilising delayed provisioning benefits cannot issue bonuses |
| Loan Recovery | Visible improvements required in recovery of classified and written-off loans |
| Banking Indicators | Must show genuine improvement across key performance indicators |
Additional Directives
Bangladesh Bank further emphasised that improvements in classified loan recovery, the performance of written-off portfolios, and key banking indicators must be tangible and demonstrable before any incentive payment is considered.
State-owned commercial and specialised banks, however, will follow the separate 2025 Incentive Bonus Guideline specifically designed for government-owned financial institutions.
Likely Impact on the Banking Sector
Bank officials acknowledge that many institutions customarily distribute incentive bonuses almost immediately after the end of the financial year—often by relying on temporary waivers or creative accounting adjustments to show profit. With the new directive in force, such practices will cease.
Only banks with genuinely strong financial performance will now qualify to reward their employees. Insiders predict that this reform will delay or completely block bonuses in most private banks, ensuring that only well-managed, profitable institutions can extend such benefits.
The latest move by Bangladesh Bank signals a stronger commitment to transparency, accountability, and sustainable financial health—aimed at restoring confidence in the country’s banking system.