Govt to consider market linked salaries for PSB chiefs

Experience in core areas like treasury, credit could be made mandatory

The finance ministry, which is in the process of appointing managing directors and chief executive officers for  Bank of Baroda, Canara Bank and Punjab National Bank, might consider hiring candidates from private banks and paying them market-linked salaries.

The move is a part of steps the government is taking to reform public sector banks (PSBs).

The post of chairman and managing director has been split and the government has appointed managing directors and chief executive officers in four banks — Indian Overseas Bank, United Bank of India, Oriental Bank of Commerce and Vijaya Bank.

A new chief executive officer will also be appointed in Syndicate Bank.

Hiring senior executives in PSBs is constrained by the wide difference in salaries with private banks. Market-linked salaries will also help the banks retain talent. PSBs also grapple with short tenures of chairmen and managing directors who barely have a year at their post.

The finance ministry is now looking to appoint chief executive officers who can serve longer.

The current State Bank of India chairman was appointed for three years. The next two chairmen will be appointed for four and five years. The government proposes to replicate this model in other banks.

Bankers have suggested candidates must have experience in four fields before they can be appointed as bank CEOs, treasury, credit, human resources and information technology. The government is considering this as an eligibility criterion.

There have been instances when bank chairmen were appointed without experience in the core functions of a bank.

Last year, a committee set up by Reserve Bank of India Governor Raghuram Rajan and headed by P J Nayak recommended reforms in state-owned banks. The committee said the government should give up control of banks and reduce its stakes below 51 per cent.

CHANGING GEARS

• Move taken to reform public sector banks
   
• Post of chairman & managing director has been split
   
• Market-linked salaries will help retain talent
   
• Tenure of PSB chiefs will be extended
   
• Candidates must have experience in IT, HR, treasury and credit departments