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Banks must shun excessive operational cost

Published : Saturday, 24 August, 2019 at 12:00 AM  Count : 757

Banks must shun excessive operational cost

Banks must shun excessive operational cost

In a bid to reduce excessive and unnecessary operational cost, the country's central bank otherwise Bangladesh Bank (BB) has asked all scheduled banks to avoid luxury decoration at head offices and branches and not to purchase opulent vehicles for board chairmen's and chief executive officers.

We welcome BB's call made to cut excessive operational expenses of our banks. BB's call comes at a time when the banking sector is practically reeling from gross irregularities markedly poor performance in recovering bad loans and serving its general clientele. We believe the primary focus of our banking high--ups should be fixed on how to establish discipline coupled with turning the sector into a profitable one. Opulence and ostentatious packages provided to our top-notch bankers has not brought out any result in return. Culture of flamboyant spending by many of our private banks is rather alarming.

The Banking Regulation and Policy Department (BRPD) in its circular directed banks to fixing up establishment costs within 30 per cent of the respective paid-up capital and follow the circular issued on August 12, 2013. BRPD also asked banks to go for a competitive price range when renting or leasing office/floor space. For a branch office, expenditure for per square foot should not exceed Tk1, 850 and when relocating a branch, the cost for per square foot should not exceed Tk1, 250.

Additionally, banks should have a limit of maximum of 6,000 square feet for an urban branch and 3,000 square feet for a rural branch. And bank's expenditure should not exceed Tk50 lakh to buy a car and Tk1 crore for a Sport Utility Vehicle (SUV) and a vehicle's minimum tenure of use for the chairman of board of directors and chief executive officers shall be five years.

We find all of the BRPD instructions logical and an effective means to put an end to our banks' financial wastage. Many of our bankers of today not only exceed crores on procuring designer brand automobiles, but they also keep changing the models almost year to year, displaying a wealthy and arrogant lifestyle linked to their profession. BRPD also identified: use of vehicles at freewill, holding of meetings of board directors and other events outside Dhaka, luxury entertainment packages for the purposes of branding and advertisements as places of over spending.   
Finally, issuing of instructions is not enough. It is also crucially important to strictly implement and monitor, whether all our scheduled banks are appropriately following them or not.

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