It’s goodbye for fancy salaries in foreign banks

RBI urges those operating in India to set up remuneration panel to fix pay

In what could change the career landscape in private and foreign banks as a lucarative option, given that they lured the best banking brains with fancy paychecks, the Reserve Bank of India (RBI) has now drawn the laxman rekha on “excessive” salary their staff can get and the management can dole out. Among bankers drawing an annual salary in excess of Rs 1 crore include ICICI Bank CEO Chanda Kochhar, Axis Bank CEO Shikha Sharma, ICICI Bank top executives directors K Ramkumar, N S Kannan, Rajiv Sabharwal. The government fixes the remuneration for key executives of public sector banks RBI’s top officials, including the governor.While neither succinctly specifying what constitued “excessive remuneration” nor putting a specific ceiling on it, the RBI, has, however, made it mandatory for private and foreign banks to obtain prior permission from RBI while fixing the salaries of their staff and CEOs and wholetime directors. Stipulating the series of dos and don’ts in this regard through fresh guidelines for them to follow, the RBI has said they should strictly go as per the Banking Regulation Act, 1949, which prohibits excessive remuneration. Incidentally, according to information available from RBI under Right to Information Act, Governor D Subbarao got a gross salary of Rs 1,28,500 in the month of June 2010. This corresponds to an annual package of little over Rs 15 lakh for RBI Governor, who is a signatory to all the currency notes in the country. In RBI’s view, these banks are required to fix reasonable compensation, taking into account all relevant factors, including the industry practice and a proper balance ensured between fixed pay and variable pay. Variable pay, however, should not exceed 70 per cent of the fixed pay in a year, it noted.The guidelines would be implemented from 2012-13. The approval process, RBI said, will involve an assessment whether the compensation policies and practices are in accordance with the Financial Stability Board (FSB) Principles. The principles are intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes. The principles call for effective governance of compensation, alignment of compensation with prudent risk taking, effective supervisory oversight and stakeholder engagement, it said. The principles have been endorsed by the G-20 countries and the Basel Committee on Banking Supervision and are under implementation across jurisdictions, it added. Banks, the RBI guidelines stipulated, should formulate and adopt comprehensive compensation policy covering all their employees and conduct annual review. The guidelines directed private sector banks to constitute a remuneration committee (RC) of the Board to oversee the framing, review and implementation of compensation policy of the bank on behalf of the board. The RC should have a minimum of three members and should include at least one member from Risk Management Committee of the Board. The majority of members of the RC should be independent non-executive directors, it said. The RC should also ensure that the cost/income ratio of the bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio, it said. Banks are required to make disclosure on remuneration on an annual basis at the minimum, in their annual financial statements, it added. As regards salary of foreign bank executives, the RBI guideline said it is expected that Head Offices of most of these banks would align their compensation policies in line with the FSB principles. Foreign banks operating in India will, therefore, be required to submit a declaration to Reserve Bank annually from their Head Offices to the effect that their compensation structure in India, including that of CEOs’, is in conformity with the FSB principles and standards, it said. RBI would take this into account while according approval of CEOs’ compensation, it said, adding, the compensation proposals for CEOs and other staff of foreign banks operating in India which have not adopted the FSB principles in their home country are required to implement the compensation guidelines as prescribed for private sector banks in India.

DH
Watch the video.............

‘Fake notes have 11 security features’

....The fake currency notes recovered by the special cell on Thursday from southwest Delhi had 11 out of 15 security features embedded in Indian currency which would have made it “almost impossible” for a common man to discern them from the original ones...............

Read.............

ATMs may accept cash directly

If the recommendations of a government-appointed committee on automated teller machines (ATMs) are accepted, besides dispensing notes, the machines may soon start accepting cash directly. The ATMs to be deployed by the banks will come equipped with a cash acceptor, which will accept currency notes of denominations between Rs 50 and Rs 1,000. At present, ATMs accept cash in an envelope, which is manually credited into the depositor's account. Therefore, it takes a day or more for the money to appear in the bank account. The new cash deposit feature will speed up the process. Moreover, the machines will be programmed to automatically retract the notes left behind by customers. The committee, which was led by Ashok Jhunjhunwala, professor, Indian Institute of Technology Madras, has also suggested that these ATMs have solar powered back-up and a surveillance mechanism in place for better safety. The committee has suggested that ATMs must have an internal camera, which should store digital images of the users and be able to stamp the transaction information on these images. When we contacted Jhunjhunwala, he confirmed that the initiative came from the finance ministry and the recommendations are with the financial services department of the ministry.

Business Today

Mindset change necessary in Kerala, says planning panel vice-chairman

.... During economic downturn we acted in both monetary and fiscal fronts. On monetary front, we worked closely with the Reserve Bank of India (RBI), which.....

Read..... 

Interest rates set for downtrend in medium term

.... The interest rates are expected to remain firm in the short term and will gradually come down in the medium term as the RBI implements monetary policy softening based on developments in various macroeconomic parameters....

Read........... 

Indian economy endures after its darkest hour

India may not be out of the woods yet, but global investors are trekking back to the country, seeing value in stocks trading at multi-year lows and a glimmer of hope for a recovery in factory output.....................

Read...............

'By second quarter, rates should start coming down': J P dua

.... We are now getting the first signs that food inflation is coming down. Once it starts coming down, it would impact on interest rate. By the second quarter, rates should start coming down. Right now, costs have not come down, so there is no reason to cut rates.

Read......... 

Give the middle class a break

.....Today, apart from the destructive policies of the RBI, a key factor behind the continuing fall in the value of the rupee is the slew of expensive purchases from abroad made by the Ministry of Defence, when the strongest defence is a growing economy. .........

Read..............

NRIs send more money back home in 2011

...The rupee's depreciation against many other currencies could be one reason for the higher remittances. Currencies such as the US dollar, Bahraini dinar or the Saudi riyal, for instance, all appreciated sharply against the rupee in the last six months.....

Read............

Jaypee Wish Town flat owners to approach RBI, SEBI

.... The RBI should put a check on such malpractices where the banks and builders apparently in connivance are diverting the investors’ money somewhere else at the cost of the project over which investments were sought.....

Read...........