Pressure mounts as 5 banks declare staff salary hike

Pressure is mounting on the banking industry to follow suit after five sharia-based banks decided to increase their staffs’ salaries to meet a recent directive of the central bank.

The Islami Bank Bangladesh, Social Islami Bank, First Security Islami Bank, Global Islami Bank and Union Bank – all of them owned by S Alam Group – decided in their board meetings this week to implement the new salary structure from March this year.

A number of senior officials from several private commercial banks told The Business Post that they are working to implement the new salary structure for bankers as five banks of the S Alom Group have already implemented the central bank’s instruction, putting them in pressure.

Forty-three private commercial banks and nine foreign banks will have to implement the new salary structure. However, new generation banks and two other banks have been given some flexibility in implementing the instruction.

Brac Bank, Mutual Trust Bank, Dhaka Bank, Mercantile Bank, Southeast Bank, and Jamuna Bank have already started groundwork to raise the issue in their board meetings.

“We have increased the entry-level bankers’ salary to Tk 30,000 from Tk 20,000 since January 1 this year. We will revise the salary structure further to meet the central bank’s instruction,” said Selim RF Hussain, managing director and CEO of Brac Bank.

Hussain said that as five banks have already implemented the Bangladesh Bank’s instruction, other banks will implement it soon.

Hussain, also the Chairman of the Association of Bankers Bangladesh (ABB), said that around Tk 2,000 crore additional cost will be added to salary costs to implement the central bank directive.

Mercantile Bank’s Additional Managing Director Mati Ul Hasan said that the salary of their entry-level officials was already higher than the central bank’s new guidelines.

The entry-level salary of Mutual Trust Bank ranges from Tk 26,000 to Tk 30,000 now. The bank’s Managing Director Syed Mahbubur Rahman said his bank is now prepared to implement the new salary structure from April 1 this year.

He said that an additional Tk 20 crore to Tk 25 crore would be added to the salary cost.

Dhaka Bank Managing Director Emranul Huq said that his bank is now preparing to implement BB’s instruction.

Three managing directors of leading private commercial banks told The Business Post that their boards did not want to raise salary at this moment as the banks are now facing different problems due to the pandemic.

They said that the new salary structure is very popular with their staff but is very difficult to implement.

Policy Research Institute of Bangladesh’s Executive Director Ahsan H Mansur said that in principle, the central bank cannot issue such circulars.

“Bangladesh Bank should not interfere in private institutions in case of officials’ salaries,” said Mansur, also the chairman of Brac Bank.

Banks directors criticised the central bank’s instruction saying that if they implement the new salary structure, their profitability will decrees.

Bangladesh Banks Association (BAB) met the central bank on January 26 and demanded more time to implement the instruction. After the meeting, the Bangladesh Bank on February 1 deferred the implementation of its new guidelines by one month.

However, on February 7, the High Court questioned the legality of The Bangladesh Bank circular and ordered the authorities concerned to furnish response within a week.