Banks' CSR spending soars despite lower profits | The Daily Star
12:00 AM, February 22, 2019 / LAST MODIFIED: 12:06 AM, February 22, 2019

Banks' CSR spending soars despite lower profits

Banks' spending on corporate social responsibility shot up last year, even overshooting the regulatory ceiling -- at a time when they logged in lower profits for higher provisioning needs from the mounting default loans.

In 2018, banks spent a total of Tk 904 crore, up 21 percent year-on-year, according to data from the Bangladesh Bank.

As per the CSR expenditure guideline of the BB, banks can spend for philanthropic purposes from their net profits and there is no limit on expenditure. The expenditure will be participatory and not mandatory.

But, they cannot spend more than: 30 percent of their CSR outlay on the education sector, 20 percent on the health sector, and 10 percent for climate risk or disaster management.

Banks breached the ceilings last year: they spent Tk 380 crore on the education sector and Tk 331 crore on disaster management, which are 42 percent and 36.62 percent respectively of the total CSR expenditure.

The CSR spending of some banks is rather curious.

For instance, AB Bank, which is listed on the Dhaka Stock Exchange, saw its earnings per share come down to Tk 0.41 in the first nine months of 2018 from Tk 0.64 a year earlier.

Yet, it spent Tk 17.19 crore under the CSR programme last year, of which the highest 48 percent went to the 'others' sector.

In 2017, the bank's net profit was Tk 2.96 crore against which it spent Tk 17.64 crore on CSR activities, according to data from the central bank.  

All the banks overshot the regulatory ceiling when it came to expenditure on disaster management, with some spending their CSR money only for this purpose.

For instance, Eastern Bank spent Tk 7.06 crore under its CSR programme, with 99.57 percent going towards disaster management, data from the BB showed.

Banks had spent the amount either through their own channels or through donations to the Prime Minister's Relief and Welfare Fund, said a senior BB official.

“The higher expenditure for disaster management fuelled the total CSR spend,” he added.

Banks get tax rebates on spending under CSR programmes, said Faruq Mainuddin Ahmed, managing director of Trust Bank.

“Moreover, banks spend from their social responsibility,” he said, adding that there is no chance of the CSR funds being misused as the central bank has set spending limits for particular sectors.

If banks spend beyond the limit, they will not enjoy the tax rebate, he added.

It is good that banks' participation in social responsibilities has increased as the money spent comes from the directors' pockets, said Khondkar Ibrahim Khaled, former deputy governor of the BB.

He went on to urge the central bank to ramp up its monitoring to ensure proper use of CSR funds.

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