The Reserve Bank of India’s (RBI) new compensation guidelines for private and foreign banks are politically correct, nothing more. According to the new guidelines, which are based on the recommendations of the International Financial Stability Board, bonuses or variable pay are to be capped at 70 per cent of fixed pay, and stock options have been kept out of it. And where variable pay component is a substantial part of fixed pay — 50 per cent or more, a large portion of it is to be deferred for over a period. It has been left to banks to define ‘substantial’ in their compensation policy. Analysts say the norms which will kick in from the next financial year will not impact at least the few large private sector banks materially. No top executive at any private bank has a variable pay over 40 per cent of fixed pay. In the aftermath of the global financial meltdown, it is fashionable to berate bankers as a class. Indian banking is highly regulated; western financial fashion is banned. And pay in private banks is lower when compared to what you earn at top non-banks. The RBI should make a pitch to New Delhi to pay state-run bankers market salaries. These banks are finding it tough to attract talent in an ever-evolving and complex banking market. It will also give a fillip to lateral recruitment in these banks. And lastly, Mint Road should also be bothered about the pay of its own officers who are the most poorly paid in Asia. The demands of RBI officers’ union have gone unheeded for years now.
India Today
