RBI sets Rs 10 lakh commission limit for non-exec directors of private banks

This will be over and above sitting fee and reimbursement expenses paid by lenders

In a bid to increase and improve the remuneration paid to the board of directors of private banks, Reserve Bank of India has set the limit of profit related commission at Rs 10 lakh for Non-Executive directors.

This will be over and above the sitting fee and reimbursement expenses paid by the lenders.

At present, banks in private sector pay only sitting fees to non-executive directors, and no other remuneration is paid to them. For instance, ICICI Bank, in its annual report state that it paid sitting fees of anywhere between Rs 4 lakh-12.80 lakh to its non executive directors as sitting fees.

This effort at increasing the remuneration of the board members has been undertaken so that the banks can retain talent.

“The need to bring in professionalism to the boards of banks cannot be overemphasized. In order to enable banks to attract and retain professional directors, it is essential that such directors are appropriately compensated,” said RBI in a notification.

However, unlike the non-executive directors the Part-time Chairman is paid a fixed remuneration with the approval of RBI. Banks are required to obtain prior approval of RBI for granting remuneration to the part-time non-executive Chairman under the Banking Regulation Act.