Bangladesh Association of Banks (BAB), a forum of bank directors, recommended that commercial banks could cut salaries and allowances of staff as high as 15% for one year starting this month.
The association in a letter also recommended banks to suspend CSR (corporate social responsibility) activities during the present crisis moment as most banks face losses due to economic fallout created by Covid-19 pandemic.
The association of the banks’ owners past week sent the letter to banks’ chairmen and Chief Executive Officers (CEOs) amid slowdown in their profits hit by the prolonged virus.
Presently, nearly 110, 000 people are employed at 41 commercial banks in the country.
Last week, City Bank Limited slashed its staffers’ salaries by 10% to offset the losses caused by the novel coronavirus outbreak. The pay cuts will be effective from June 1 this year and last till December 31 this year.
City Bank managing director and CEO Mashrur Arefin told the Dhaka Tribune that they had to cut the salaries under constraints as the bank had no alternative to survive.
Mashrur admitted the BAB letter would have a positive impact on bank staff as none would dare to slash salary by more than 15% during the difficult time of banking business.
He said worldwide banks and other companies were cutting their staff salaries to survive the crisis period caused by the coronavirus pandemic.
He said that the BAB sent a letter to all the commercial banks, recommending cutting the staff salaries and allowance up to 15%.
“We did it and other banks will also be doing the same,” he added.
City Bank top official Arefin said only salaries of employees earning more than Tk30,000 per month had been reduced. Of the 6,000 staff of the bank, 5,000 have had their salaries cut, he elaborated.
"We are cutting costs so that no body losses their job", he said.
Following the example of City Bank, several banks are planning for a pay cut , according to industry insiders.
Last month, AB Bank cut salaries and allowances by 3% to 5% from entry level to managing director.
“Our bank has cut salaries and allowances to reduce the loss owing to the economic fallout of COVID-19,” said an official of the bank, seeking anonymity.
Talking to Dhaka tribune, NRBC Bank Chairman Tamal Parvez said his bank already lost 50% business, as the country’s garment industries were facing huge order cancellations due to the worldwide lockdown.
“BAB recommended us to reduce the salaries and allowances of bank staff. All the banks should cut the salaries of their staff because salary cut is better than job cut,” Tamal, also a member of BAB, told Dhaka Tribune.
NRBC bank is yet to go for a pay cut , Tamal said before adding that, “It may happen anytime as a measure to survive during the period.
“The implementation of a single-digit interest rate has already reduced our profit and most of the banks are incurring loss due to it,” said NRBC bank chairman.
The BAB Chairman Nazrul Islam Mazumder did not respond to a phone call.
The former Chairman of Association of Bankers, Bangladesh (ABB) Syed Mahbubur Rahman, however, said salary cut was not a proper decision to reduce the cost.
“Banks should prioritize reducing other costs like office cost, instead of cutting staff salaries,” Mahbub, also the managing director of Mutual Trust bank added.
“Now we should focus on the cutting of space of office and reduce other official cost,” he said further.
Contacted, Bangladesh Bank spokesperson Md Serajul Islam said they were yet to know the salary cut initiatives by commercial banks.
He, however, said, “Salary cut is better than job cut.”
