Uniform salary structure for private banks






The Bangladesh Bank (BB) circular on salaries for private sector bank officials at entry level, issued a few weeks ago, came out of the blue. Bank owners and bankers were surprised, although a salary structure for civil servants and employees was long overdue.

In its January 20 circular, the central bank asked private banks to set minimum salaries for their entry-level officers serving the general and treasury sections and lower-level employees.

Predictably, BB’s move did not go over well with the sponsor-executives of the private banks. The Association of Bangladesh Banks (ABB) and some senior private bank officials have met with senior central bank officials to discuss the issue. As a result of this meeting, the BB amended its previous guidance to provide temporary relief to fourth generation banks.

ABB’s concerns around the BB directive are not without reason, however. Banks have been going through a tough time like every other business since the pandemic began its onslaught on the economy in March 2020. Had the central bank not relaxed loan classification rules, most banks would have gone through a much more difficult period. The increase in administrative costs following the implementation of the new BB directive on wages and salaries for junior civil servants and lower-level employees could further reduce banks’ profits.

There is, however, another side of the coin. Some private sector banks, unlike public banks, do not have a uniform compensation structure for their officers and employees. There is a disparity in interbank and intrabank salaries and in the payment of allowances. As mentioned in the BB circular, there is a glaring gap between the salaries of senior and lower management of banks.

It is not surprising that first or second generation banks pay better than their later versions. But the gap is so wide that it is proving demoralizing to third- and fourth-generation bank officials. What is more troubling is that some new banks do not have well-defined pay scales for their managers and employees. It depends on the sweet will of the management to give or not to give an annual raise. The allowances are granted at different rates.

The central bank’s latest move to set the minimum wage for entry-level civil servants will fill only a small part of a big void. What is needed most is a uniform salary structure for civil servants and full-time employees of private banks. Civil servants who would be employed on a contractual basis may be exempted. But a limit on the number of such officials a bank would hire must also be set.

What banks need to attract bright young people is an attractive salary structure. This seems important because of the recent change in attitude of young people towards a banking career. A few years ago, educated young people were more interested in a career in banking. Now they are trying hard for government jobs due to better salaries and career prospects. Some banks offer unattractive salaries and allowances to newcomers. There is no denying that employers dictate terms due to the abundance of educated people. But taking advantage of it will encourage brain drain in the long run.

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William M. Mayer