Group -3

1) Priam, Nahid Fatema- 21-91924-1

2) Rahman, Mazbahur-21-91925-1
3) Farah Saqueeba- 20-91708-2
4) Iftahaz uddin rehab bhuiyan- 21-92100-2

Minimum Salary for Private sector Bank Employees

1. After visited 6 private bank central bank found that a huge number of employees quit
their job, which was very unusual. After investigation they found that there are huge
salary gaps between the employees. Central bank circular is encouraging banks to treat
both efficient and inefficient employees equally instead of incentivizing skilled
manpower, which will have a severe impact on the banking business.

The main reasons of this circular are to minimize the gap. The wide gap in salaries
between lower level and higher level employees had prompted the central bank to
interfere in the pay structure of private banks. On the other hand employee who recently
joined get very low salary whereas an senior employee get around 20 lakh with other
benefits who have almost the same education qualification. The entry level salary or the
minimum salary amount which is 28,000 taka will reduce the gap.

Another reason is to improve the devotion, morality, morale, work ethics of the bankers
by giving them the deserved salary.

As we know in the private sector, incentives come through performance resulting in

different salary structures for the same post. Because of this, many employees lost their
job if they are not able to meet the requirements. This circular is also makes to solve this
issue. Banks cannot set the condition of fulfilling the deposit collection target in case of
making a job permanent or for a salary increase, according to the circular.

2. The entry level salary that the Bangladesh Bank has set for private bankers is very
logical, but the other instructions relating to performance may fail to be implemented.
Banks are trying to improve operational efficiency through tech investment and reducing
per head cost. Under this circumstance, the new salary circular will put another pressure
on the banks.

On the other hand the bank will be benefited by many ways like it will reduce the cost of
turnover as many employees will be retain because of the new salary structure. Again
when they are much happy with their salary their work efficiency will increase.

The experts have been identified two vital problems in Bangladesh's banking sector. One
is there are too many banks, owned by a group of dominant people. Numerous banks
have over and over accepted loans to supplementary companies of other bank owners or
people connected with them, who are among the vital loan defaulters in our country and
this one is connected to the second problem, which is the vast growth of non-performing
loans in the banking sector. However these policies have been taken by our regulators or
have happened due to their indolence.

Very recent, the Bangladesh Bank marked to grant banks not to treat borrowers as
defaulters if they repaid only 15% or more than of their total loan instalments payable
down from 25% in 2020. Besides, banks were granted to transfer the unrealized interest
on the 85% or less than of the loans to their income books up from 75% the year before
even if the sums were not paid. Because of this relaxed policy, borrowers remained
unclassified by paying only 15 percent of their loan amounts for the year. And banks
were able to lower their provision requirement and this was raised most banks' operating
profits in 2021.

Second, by increasing their incomes, banks are overstating their profits and are creating
the scope for paying higher dividends to their owners and shareholders, without really
making any extra earnings to pay their shareholders from. Even though the central bank
has said it has directed banks to withhold from administering dividends as an extra
precaution, one wonders whether the central bank or the commercial banks will even
follow through with this, given their poor track record of abiding by their own set of
rules.

Thirdly banks are pushing their stock prices up not by operating more efficiently or being
more productive, but simply by changing the numbers. Meanwhile, the regulators cheer
them on, whereas it is their duty to prevent such accounting visualization.

Finally, the market is supposed to fix the prices determine what something is really merit.
The permission of such accounting changes, the regulators are not allowing the market to
operate, thereby destroying its ability to determine prices. Such market distortion is
dangerous, especially in the financial sector.

The Bangladesh Bank issued the mentioned command a few hours after its meeting with
some of the country's top business leaders at its headquarters, even though we are not
aware of the central bank conducting any studies to estimate what effects its decision
would have on the overall economy.

This is obviously not the first time that intervention occurred in the banking sector at the
requirement of special interest groups. This happened despite the fact that banks were
clearly okay with, if not complicit in, the "corruption" that had destroyed their balance
sheets. The state decided to shift the losses, caused by the willful defaulters, "onto the
public" by using taxpayers' money to bail the banks out. Such practices cannot lead to
financial discipline and a robust banking sector.
 These interventions are clearly not in the interest of the public or the banks themselves in
the long run. Even though the Bangladesh Bank is allowing banks to pretend like they are
performing well, the reality is that they are becoming more vulnerable.

The important thing of the businesses is that make profit by providing something of value
to the people get support from the government, not those who make profit by getting
subsidies by lobbying to the authorities.

All over the world, governments are supporting businesses in their countries to recover
from losses incurred during the pandemic. But at the same time, almost all central banks
around the world are trying to get commercial banks in their countries to increase
provisions in order to offset the risks brought about by the pandemic. We seem to be
doing the very opposite.

However, Bangladesh Bank has asked banks to maintain an additional three percent
provisions, relaxing banking discipline and allowing habitual defaulters to potentially get
more access to bank credits is dangerous, and may lead to further expansion of, which is
already very high.

3. After the enforcement of the new salary structure, the banks are asked to rationalize
salaries of their existing employees proportionately. I don’t think that there have big
problem or challenged the bank might face I implementing the policy,  We already know
that the central bank issued a notice in this regard which will come into effect from next
March. It also stated that no banker can be fired if they do not achieve the target set by
the bank or on the pretext of incompetence. According to the notification, the minimum
monthly wage for trainee assistant officers (general and cash) will be Tk28,000 during
their probation period. Also, office assistants, including security guards, cleaners, and
messengers, will get Tk24,000 as the minimum wage. Increase the salary will motivate
the employees and encouraged to do lot of hard effort for the bank, which is good for
bank to achieving the goal easily.  
But there have some challenges may be occurred:  
 Banking sector lacks properly skilled workforce. For effective and smooth operation
and management of bank, trained and skilled employees need to be developed.
Otherwise increase the unskilled employee’s salary cannot help to achieving goal.  
 According to a research on cyber security of the banks in Bangladesh by Bangladesh
Institute of Bank Management (BIBM), nearly 52 per cent of all the banks are facing
a high risk of cyber-attacks. Another research has revealed that 80 per cent of the
banks in the country do not have relevant staff skilled and efficient enough to
withstand cyber-attacks. It is urgent to develop systems that can keep the banking
information, servers etc. safe from potential cyber-attacks. Additionally, the human
resources of the banks should be equipped with updated with IT knowledge and skills
related to cyber security. 
  Banks have significantly increased in number, but their service is yet to reach the
vast majority of disadvantaged and low-income groups at affordable costs. Banks
should focus on bringing skillful employees, these people under the umbrella of
banking services. Additionally, asset quality management and financial performance
need to be improved drastically by ensuring good governance, transparency,
accountability and adopting better risk management techniques. Otherwise low vision
employees, unskilled and not enough training employees increases the salary cannot
help or bring the good result, which is a big problem.   

4. Decision taken by the central bank for the job security purpose of the bank employees are
realistic because when employee feel secure in their job, they can focus more effectively
on work and produce better-quality results. As mentioned Banks cannot set the condition
of fulfilling the deposit collection target in case of making a job permanent or for a salary
increase. It will make the employees more secure in their job.

 The new circular will discourage good performers as banks were asked to treat
both efficient and inefficient workers equally in terms of incentives. 

 Job security is important for both employees and companies. This circular ensure
that. For employers, job security can help them: Attract and retain talent,
maintain a productive workforce ,encourage loyalty among employees ,maintain
a positive employee moral.

 When salary gap reduced it make the employees more efficient towards job
because biasness removed.

 Different banks have different salary structures based on financial performance.

Even top bankers get salaries based on the business they bring for directors. This
circular will reduce it in future.