BRPD also asked banks to go for a competitive range of price when renting or leasing office/floor space
In an attempt to reduce operation cost, Bangladesh Bank (BB) has asked all scheduled banks to avoid luxury decoration at head offices and branches.
The central bank also asked them not to purchase expensive vehicles for board chairmen's and chief executive officers.
Banking Regulation and Policy Department (BRPD) of the central bank has served instructions to banks to this effect on Tuesday.
In a series of observations, the BRPD said banks’ excessive spending has been noticed in purchase of vehicles for board chairmen, directors and chief executive officers.
BRPD also identified: use of vehicles at freewill; holding of meetings of board directors and other events outside Dhaka; luxury entertainment; and the purposes of branding and advertisements as places of over spending.
"Tendency of unnecessary spending has been observed in few banks, which is towering the operation cost (of banks) and influencing interest rates," stated the BRPD circular.
Therefore, the BRPD in its circular directed banks to fixing up establishment costs within 30% 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.
The A 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, said the circular.
The circular further stated that banks must reduce the cost of purchasing furniture and fixtures (office decoration purposes) for its head offices and branches, adding, for a branch office, expenditure for per square foot should not exceed Tk1850 and when relocating a branch, the cost for per square foot should not exceed Tk1250.
BRPD said, 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 adding that all the scheduled banks must avoid all the unnecessary spending including travel, entertainment, stationary purchase and miscellaneous purposes.