Soon, RBI will decide salaries of foreign banks' honchos

Salaries of top management executives at private and foreign banks will have to be as per RBI's guidelines from next fiscal, central bank said today, while asking the lenders to start preparing for the new wage rules.

"The implementation of the Reserve Bank guidelines on compensation policy has been deferred till 2012-13. This will also give sufficient time to banks to formulate their policies," RBI said in its annual monetary policy statement.

It was proposed in the second quarter review of Monetary Policy for 2010-11 to issue final guidelines on compensation practices by end-December 2010.

However, RBI said that in October 2010, the Basel Committee on Banking Supervision (BCBS) brought out a consultative paper for public comments.

"As the paper provides guidance on important methodological issues, it has been decided to await the final version of this paper for formulating our guidelines," it said.

The apex bank further said that banks in the meantime should refer to the BCBS consultative paper and begin the preparatory work.

It was indicated in the quarterly policy of October 2009 that in line with the steps taken by the global community, particularly the initiatives taken by G20 nations, the Reserve Bank would issue guidelines to private sector banks and foreign banks with regard to sound compensation policy.

It was proposed to issue guidelines based on the FSB principles on sound compensation practices, which would cover, among others, effective governance of compensation, alignment of compensation with prudent risk-taking and disclosures for whole time directors and chief executive officers as well as risk takers of banks.

Accordingly, draft guidelines on sound compensation policy were framed and unveiled in July 2010 by the central bank for public comments.