Investigations opened against several loss-making banks for breach of regulations
The Department of Financial Institutions (FID) of the Ministry of Finance on Thursday opened an investigation into several loss-making state commercial banks (SoCBs), which violated regulations and continued to pay large incentive bonuses to their employees.
The FID will proceed after the central bank expressed concern over the serious allegation that was published in a recent report.
The central bank had previously sent a letter to the ministry to take action in this regard.
According to sources at the ministry, Md Ashadul Islam, secretary of the FID, had formed a committee of three additional secretaries on Wednesday.
Relevant banks have already been asked to provide their financial statements, they also said.
Two other ministry secretaries, Arijit Chowdhury and ABM Ruhul Azad, confirmed to Dhaka Tribune that they will submit their final report once their investigation is completed on Monday.
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According to the FID, the SoCBs are making a profit. However, the situation changes when you consider the issue of their default loans. In this case, they cannot make a profit, and neither can their employees obtain incentive bonus. The central bank has asked the FID to look into the matter. The committee has already been formed. We have also started investigating from today (Thursday). We hope to be able to submit the report to the principal secretary by Monday, ”said Arijit Chowdhury.
Bangladesh Bank executive director and spokesperson Md Serajul Islam told Dhaka Tribune that such a letter may have been sent, but he was not aware of the contents of the letter.
“However, I can say that the central bank has a law on how public banks will grant incentive bonuses to their employees,” he added.
In accordance with the regulations, the incentive bonus rule for SoCBs states that employees must receive an incentive bonus based on the net profit realized by the respective institutions, and that they should not be eligible for it if losses occur. are incurred.
The rules also suggested setting the incentive bonus on the basis of a bank’s net profit, only after making the necessary provisions against classified loans and other soured assets, and also when the liquidity position remained at a satisfactory level.
Statistics up to December 31, 2020 showed that of the six SoCBs, only Sonali Bank and BDBL reported profits.
Agrani Bank and Rupali Bank also posted net profit over the past year while maintaining a provisioning deficit of Tk 1,319 crore and Tk 822 crore respectively.
On the other hand, Janata Bank suffered a loss of 5,054 Tk crore that year, while Basic Bank reported a loss of Tk 366 crore.
In 2020, five SoCBs, except BDBL, had a cumulative deficit of Tk 13,705 crore.
Until December 2020, the volume of classified loans in the banking sector stood at Tk 88,283 crore, of which almost half belonged to the six SoCBs.
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Dhaka Tribune attempted to reach Janata Bank Managing Director Abdus Salam Azad and Rupali Bank Managing Director Obayed Ullah Al Masud, but none of them were available for comment despite phone calls and comments. Repeated SMS.
However, Agrani Bank chief executive Mohammad Shams-Ul Islam told the media that the central bank grants a provisioning waiver to public sector banks, taking into account the services they provide to the government free of charge.
“If the government had given us the charges, our profit might have increased and the funding deficit might not have been created. As a result, we may have made a huge net profit in the truest sense, ”he added.
Islam said they provide free services such as scholarships, allowances for the elderly and widows, interest relief for farmers affected by the floods, and a few others.
“We provided an incentive bonus based on net profits,” he said, adding that his bank offered three bonuses per year.
AB Mirza Azizul Islam, economist and financial adviser to the former caretaker government, told Dhaka Tribune that companies generally receive shares when they make a profit.
But offering incentives without making a profit is unacceptable. Even after that, exceptions can only be made to employees who have shown excellent performance throughout the year, he added.