Inquiries open against several loss-making banks for violating regulations
The Financial Institutions Department (FID) of the Ministry of Finance on Thursday began investigating several loss-making state-owned commercial banks (SoCBs), which have violated regulations and continued to dish out hefty incentive bonuses to its employees.
The FID will carry out after the central bank expressed its concern about the serious allegation which was published in a recent report.
The central bank had previously sent a letter to the ministry for doing the needful 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.
The concerned banks have already been asked to provide their financial statements, they also said.
Two additional secretaries of the ministry, Arijit Chowdhury and ABM Ruhul Azad, have confirmed to Dhaka Tribune that they will submit their final report after finishing their investigation, on Monday.
"According to the FID, SoCBs are making profits. However, the picture changes if we consider the issue of their default loans. In that case, they cannot make profit, nor can their employees get any incentive bonus. The central bank has requested FID to look into the matter. The committee has already been formed. We have also begun investigating from today (Thursday). We hope to be able to submit the report to the senior secretary by Monday," said Arijit Chowdhury.
Md Serajul Islam, executive director and spokesperson of Bangladesh Bank, told Dhaka Tribune that such a letter may have been sent, but he was not privy to the content of that letter.
"However, I can say that the central bank has a law on how the state-owned banks will give incentive bonuses to their employees," he added.
According to regulations, the incentive bonus rule for SoCBs dictates that the employees should get incentive bonus based on the net profit made by the respective institutions, and that they should not be eligible for it if losses are incurred.
The rules also suggested fixing the incentive bonus based on a bank's net profit, only after making necessary provision against the classified loans and other soured assets, and also when the liquidity position would remain at a satisfactory level.
Statistics up to 31 December, 2020 showed that of the six SoCBs, only Sonali Bank and BDBL declared profits.
Agrani Bank and Rupali Bank also showed net profit in the last year while keeping a provisioning shortfall of Tk1,319 crore and Tk822 crore respectively.
On the other hand, Janata Bank incurred a loss of Tk5,054 crore that year, while Basic Bank declared a loss of Tk366 crore.
In 2020, five SoCBs, except BDBL, had a cumulative shortfall of Tk13,705 crore.
Until December 2020, the volume of classified loans in the banking sector stood at Tk88,283 crore, of which almost half the amount belonged to the six SoCBs.
Dhaka Tribune tried 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 comments despite repeated phone calls and text messages.
However, Agrani Bank Managing Director Mohammad Shams-Ul Islam told the media that the central bank grants provisioning waiver to public sector banks, taking into consideration the services they provide to the government free of charges.
“Had the government given us the charges, our profit may have increased and provisioning shortfall may not have been created. As a result, we may have earned a huge net profit in real sense,” he added.
Islam said that they provided free services like student stipends, allowances for old age people and widows, interest waiver to flood affected farmers, and some others.
"We provided an incentive bonus based on net profits," he said, adding that his bank provides three bonuses a year.
AB Mirza Azizul Islam, economist and financial adviser to the former caretaker government, told Dhaka Tribune that generally companies are given shares when they make profits.
But providing incentive bonuses without making profit is unacceptable. Even after that, exceptions can only be made to employees who displayed excellent performance throughout the year, he added.