Banks and non-bank financial institutions will soon have to spend 2.5 percent of their net profits on corporate social responsibility (CSR) activities, as per the guideline prepared by the central bank.
The draft of the guideline, which is now awaiting formal approval, however, has exempted banks and NBFIs that are making losses, facing capital deficit or provisioning shortfall.
The move comes as part of Bangladesh Bank Governor Atiur Rahman's efforts since 2009 to get financial institutions to contribute to the wider society that they operate in.
In what will be a landmark move, the guideline has also specified areas for CSR expenditure and imposed a ceiling on sectoral allocation.
Education must get at least 30 percent of the CSR funds and no other sector will be allowed to enjoy more than 15 percent of funds a year.
In the absence of a guideline, some institutions spent at will in the name of CSR. The finance ministry has recently suspended the CSR activities of four state banks upon allegations of irregularities.
“We are at the final stage of formulating a well-documented policy on CSR. Things will fall in place after the policy is issued,” Rahman told The Daily Star.
He said the abuse of CSR option in some banks might have taken place for want of a proper policy guideline.
Since 2008, banks and NBFIs have been running their CSR activities based on a notice issued by the department of off-site supervision of the central bank in June 2008.
It suggested some priority areas such as self-employment and renewable energy programmes, promotion of folk crafts, music and performing arts, but BB could not take any punitive action if the spending diverged from these areas as compliance to the notice was not mandatory.
Last year, banks spent around Tk 442 crore on CSR activities, up 45.12 percent year-on-year. Some Tk 138.58 crore was spent on humanitarian and disaster relief, the highest, followed by education at Tk 129.52 crore.
Islami Bank Bangladesh spent the highest on CSR -- Tk 47.6 crore.
source: The Daily Star
