Non-executive directors' remuneration cap increased to Rs 30 lakh: RBI

The Reserve Bank of India has decided to increase the cap on remuneration of non-executive directors (NEDs) – excluding the chairperson – in private sector banks, including wholly-owned subsidiaries of foreign banks, to Rs 30 lakh per annum, up from Rs 20 lakh.

“Considering the crucial role of NEDs in the efficient functioning of bank Boards and its various Committees, and in order to further enable the banks to attract qualified, competent individuals to their Boards, it has been decided to revise the aforementioned ceiling to Rs 30 lakh per annum,” the banking regulator said in a notification.

The notification further stated that the banks are required to have suitable criteria for granting fixed remuneration to their NEDs, with the approval of their Board before any review of remuneration.

“The Board of the bank may fix a lower amount within the ceiling limit of Rs 30 lakh per annum, depending upon the size of the bank, the experience of the NED, and other relevant factors,” it said.

The instructions are applicable to all private sector banks, including Small Finance Banks (SFBs) and Payment Banks (PBs), as well as the wholly-owned subsidiaries of Foreign Banks. The instructions will come into force with immediate effect, the RBI said.

As is the practice, these lenders will be required to obtain regulatory approval regarding remuneration to Part-time Chairmen.