The top three private banks in the country, ICICI Bank, HDFC Bank and Axis Bank have rewarded their chief executives with higher remuneration in 2011-12 – in line with the improved performance of their organisations.
According to industry players and analysts, private banks fared better than their state-run rivals and improved their profitability despite the uncertainty in macro-economic environment.
ICICI Bank, the largest private sector bank in India, increased the remuneration of its Managing Director Chanda Kochhar by 33.2%. Kochhar received Rs 4.25 crore in 2011-12 compared to Rs 3.19 crore she earned in the previous year. It included basic pay, performance bonus, allowances and perquisites and retirement benefits like contributions to provident fund, gratuity and superannuation fund.
HDFC Bank's Managing Director Aditya Puri, who is also believed to be the highest-paid CEO among Indian private banks, got 25% hike. He earned Rs 4.90 crore last financial year that included basic pay, performance bonus, allowances and perquisites, contributions to provident fund and superannuation fund. His remuneration was Rs 3.92 crore in the previous year.
Shikha Sharma, MD of Axis Bank, received Rs 2.53 crore in 2011-12, or 14% more pay than the previous year. This figure, however, excludes retirement benefits like contributions to provident fund, gratuity and superannuation fund.
All the three banks did better in terms of financial numbers. For instance, In 2008-09, just before Kochhar took charge of ICICI Bank the lender's net profit growth was only 5%. Rising delinquency rate was eroding the bank's profitability. After becoming the CEO in May, 2009 Kochhar decided to cut the unsecured loan book that capped further rise in bad loans and improved the lender's financial performance.
ICICI Bank's consolidated profit after tax grew by 25% in 2011-12. Kochhar's performance bonus during the year was increased by 56.6% to Rs 1.30 crore.
HDFC Bank, the second largest private bank in India, has seen over 30% growth rate in annual profits for last five financial years. In 2011-12, Puri received a performance bonus of Rs 1.51 crore compared to Rs 0.93 crore in the previous 12 months.
For Sharma, the variable pay increased by 30% last financial year following 25% rise in Axis Bank's net profit.
In January, 2012, the Reserve Bank of India [RBI] had released guidelines on compensation of whole-time directors, CEOs, risk takers and control function employees of foreign and private sector banks.
As per those guidelines, private banks need to frame a compensation policy and implement it from 2012-13 financial year. Also, the banks' capital adequacy and cost to income ratios must support the remuneration packages of its senior management employees, the central bank said.
