CEOs of public sector banks have something to cheer about, finally.
The Finance Ministry is set to give freedom to bank boards to offer "ad hoc" incentives to chairman-cum-managing directors as well as executive directors of Public Sector Undertaking banks. An announcement on this will be made before mid-December, a highly placed source has said.
This will be the final move towards giving managerial autonomy to PSU banks and address the long-standing demand of the brass of the state-run banking industry.
The government has already allowed bank managements to offer performance-based incentives to all employees and most banks have put in place such a salary structure.
"We are empowering boards to give extra money to CMDs and EDs. To start with, payments will be 'ad hoc' as it is not easy to offer profitability-linked incentives to senior bankers when heads of other public sector undertakings are not getting such benefits," said a North Block official.
The salaries of the CEOs of State Bank of India, Industrial Development Bank of India, Nabard and a deputy governor of the Reserve Bank of India are now linked to the salary of a secretary in Government of India.
The salaries of other PSU banks' chairmen are linked to that of a special secretary, while an ED's salary is linked to a joint secretary's. A senior bank chairman's monthly salary is about Rs 45,000.
Besides, he is entitled to a furnished house, medical reimbursement (full reimbursement for him and 75 per cent for his family members) and a car for personal use up to 400 km a month.
There are three components of a bank chairman's salary basic, dearness allowance and city compensatory allowance. Typically, a senior chairman's basic (with 50 per cent of DA merged with it) is Rs 39,000 a month.
This is also the ceiling and once a CEO hits this ceiling, he is not entitled to his annual increment of Rs 500 any more.
Some senior general managers of PSU banks earn a higher salary than the EDs.
Chairmen also get pension based on their last salaries drawn as bank employees. Since a chairman's post does not carry any pension benefit, after retirement, a CEO continues to get a pension of Rs 10,000-12,000 a month, based on his last salary drawn as a general manager.
"We play the role of a missionary. You cannot manage a balance sheet of over Rs 1 lakh crore with a Rs 30,000 monthly salary (net of taxes and other statutory deductions) unless you are convinced that you are doing a charity. If the ministry empowers bank boards to give incentives to us, it is good news," said a PSU bank CMD.
"The incentives to be offered to CMDs and EDs will not be directly linked to profitability. We will not specify a percentage of profits that can be given as incentives to CEOs. Let the boards start offering money on an 'ad hoc' basis until a transparent incentive mechanism is worked out," the finance ministry source pointed out.
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