IDBI, Bank pay structures to be calibrated

While the two strategic business units (SBU) of the new banking company, the Industrial Development Bank of India (IDBI), will exist for a few more years, the pay structures of IDBI and IDBI Bank employees will eventually be calibrated, said M Damodaran, IDBI chairman, here today.

The financial institution, after its merger with IDBI Bank, exists as two SBUs "" one focussing on development finance and the other on commercial banking.

"The two SBUs will remain for a few years but not till kingdom come," Damodaran said on the sidelines of an event held by the Bombay Management Association to present him with the Finance Man Of The Year award.

Both the SBUs are growing fairly significantly and we will integrate them in a few years, he said. On the human resources front, Hewitt Associates has been given the mandate to integrate the compensation structures.

IDBI has salary parity with the Reserve Bank of India, while IDBI Bank pays its employees more handsomely in tune with other private banks.

"We are revamping the entire salary structure. We will move towards a cost to company structure and avoid the several allowances that we have now. We will have uniform compensation package eventually but not right away," he said.

Damodaran had earlier spoken of introducing performance-related pay in IDBI, a practice unheard of in the public sector. On the merger front, Damodaran said, "We have submitted the scheme of amalgamation to the Reserve Bank of India."

IDBI converted itself into a bank on October 1, 2004, and aims to complete its merger with IDBI Bank by March 31, 2005. IDBI Ltd has convened as extraordinary general meeting on February 23, 2005, to seek the shareholders' approval for the swap ratio of 1:1.42 for the merger of IDBI Bank with itself.

While Government of India will hold 51.4 per cent stake in the merged entity, IDBI is set to retain 2.5 per cent out of its 55.33 per cent stake in IDBI Bank in a trust for future realisation of shareholder value along with extinguishing the remaining part of its holding.