Bangladesh Association of Banks (BAB), an association of private bank owners has recommended a 15 per cent reduction in the salaries and allowances of officials with a salary of more than Tk. 40,000 for a year and a half to deal with the coronavirus outbreak.
The decision to keep the bank afloat without retrenchment of staff will be effective from July 1 this year to December 31, 2021. No employee will be given promotion, increment and incentive bonus at this time.
A letter signed by the BAB secretary general in this regard was sent to the chairmen of the private banks on June 14. Although it was suggested to reduce the salaries and allowances of the employees as well as to stop promotions, increments and incentives, it was not specified at this time what concessions the employers would be given in this situation. It is also unknown whether the banks will reduce rate of interest during at this time.
As a result this unilateral decision of the owners has created anger and frustration among most of the bankers. If the bankers become inactive, the bank will suffer a lot. The demand of the bankers is not to reduce the salary allowance of all banks.
Analysts believe that only bankers or owners have a responsibility to deal with the current situation. Owners also should not take dividends for two years if the bankers’ salaries and allowances are reduced. This will strengthen the financial health of the bank.
Former Governor of Bangladesh Bank Dr. Salehuddin asked why the salaries and allowances of the employees would be reduced only for the profit of the banks. What will the owners will give discounts in this situation. Employees should also be informed whether they will receive dividends at the end of the year.
Officials at several banks, who did not want to be named, said the reduction in salary, allowances would disrupt work if there was dissatisfaction among employees. The customer will be deprived of quality service. A number of officials have called on the board to consider the matter seriously before reducing salaries and allowances.
Nazrul Islam Majumder, chairman of BAB and Exim Bank said there was no instruction in the BAB letter to give dividents to the owners even though it was suggested to reduce the salaries and allowances of the employees. .
Asked whether the salaries of the employees would be reduced only and whether the owners would take less dividends, Nazrul Islam Majumder said, every bank has its own policy on how to run. The salary-allowance and investment type of all banks are also different. So the banks will run on their own management. BAB will not intervene.
The letter from BAB said that from July 1 this year to December 31, 2021, all the officers and executives of all grades whose monthly gross salary is more than Tk. 40,000 will have to reduce by 15 per cent. Promotions, increments and incentive bonuses will not be given for the next year and a half. All appointments including ongoing recruitment of the bank should be stopped. From now till December 31 of 2021 opening of new branches, sub-branches, agent banking, all kinds of advertisements in print, online newspapers and television will have to be stopped. The banks must refrain from buying all kinds of permanent assets.
The letter further states that all foreign tours must be stopped. All types of CSR, donations, charities must be stopped. All customers need to keep 'get- together' off. Officers and executives 'get-together' and manager's conference will remain suspended. If necessary, it should be done in a virtual manner. Large expenses such as IT related, software, hardware purchases are kept at a limited level for the time being. All other expenses should be kept to a limited level. The letter said steps could be taken to keep the bank afloat without retrenchment of employees.
Meanwhile before BAB's announcement, on June 11, Managing Director of Citibank Mashroor Arefin called 55 senior officials of the bank and announced a 16 per cent pay cut. Out of 16 percent, 10 percent salary and 6 percent other benefits will be reduced. It will be effective from June. It will remain in force till December 2021.
On June 14, the board of directors approved a decision to reduce the salaries and allowances of the employees of Exim Bank, which is owned by the BAB chairman, by 15 per cent. AB Bank has also reduced the salary allowance.
In this regard, former governor of Bangladesh Bank Khondoker Ibrahim Khaled said, Bangladesh Bank should find out whether BAB can issue such a letter or not. However, reducing the salaries and allowances of the employees alone will not solve the problem. Banks need to make loan disbursement and realization activities more transparent.