Dhaka, Bangladesh (BBN) - The central bank on Tuesday directed that commercial banks with capital or provision shortfalls will no longer be allowed to pay incentive bonuses to their employees.
Previously, banks were able to disburse such bonuses even when they faced financial deficits.
The directive aims to strengthen governance and improve efficiency across the banking sector. A circular was issued to the managing directors and chief executives of all banks on the day.
According to the circular, incentive bonuses may only be paid from profits generated based on the current year’s actual income and expenses. Bonuses cannot be issued from retained earnings.
“Incentive bonuses should come from the bank’s current year’s income and expenses, not from retained earnings,” a senior Bangladesh Bank (BB) official said, adding that banks with capital shortfalls are prohibited from paying bonuses.
Banks using deferral facilities, or those with classified or written-off loans, are also barred from offering such incentives, the central banker explained.
BBN/SSR/AD