SBI mulls performance-linked pay for officers

Taking a cue from the private sector, State Bank of India (SBI) is considering a proposal to offer variable pay to its over 60,000 officers.

If the proposal gets implemented, this would be a first among the public sector enterprises in the country.

The country's largest commercial bank is internally working out the details of the plan now. At the second stage, it will have to win support of its officers' union.

It will also require the nod of the government and its owner "" the Reserve Bank of India. According to the proposal, the salary package will have two components "" fixed and performance-linked incentives, which will vary from officer to officer.

The variable component is likely to be as high as 50 per cent of the fixed amount. The scheme would be applicable right from the junior officer level to the general manager level. All the 60,000 officers of SBI are members of the All India State Bank Officers Federation.

The federation would have to agree to the variable pay scheme for the proposal to gain momentum. Discussions with the union are yet to commence.

The bank is also planning to hire 500 agriculture officers on a variable pay scale.

Among the public sector banks, Bank of Baroda has hired a few senior executives offering them market related salary packages. Dena Bank too has recently advertised looking for middle level executives. However, Dena is not planning to offer market related salary.

The proposal for variable pay in State Bank is in the initial stages and many employees don't see the idea crystallising since SBI, like all other nationalised banks, is part of an industry-wide wage settlement process for its officers and clerical staff.

Opposition from the unions may be another big obstacle. There is also concern among officers that the appraisal model for performance measurements may be subjective and faulty.

The last industry-wide wage settlement expired in October 2002 and negotiations for the latest round have been on.

This could be the last industry-wide settlement in the Indian banking sector. The management has asked for mobility and full computerisation as preconditions for signing the settlement.

The unions, however, have been resisting the move. There has been one round of industry-wide strike protesting against the management's move.

Industry observers say that the State Bank move, if it succeeds, could be a model for other banks to follow.