PSU bank bosses may take home much more

Ad hoc incentives set to be allowed for directors.

The CEOs of public sector banks have something to cheer about, finally. The finance ministry is set to give freedom to bank boards to offer "ad hoc" incentives to chairman-cum-managing directors (CMDs) as well as executive directors (EDs) of PSU banks. An announcement on this will be made before mid-December, a highly placed source has said.

This will be the final move towards giving managerial autonomy to PSU banks and address the long-standing demand of the brass of the state-run banking industry.

The government has already allowed bank managements to offer performance-based incentives to all employees and most banks have put in place such a salary structure.

"We are empowering boards to give extra money to CMDs and EDs. To start with, payments will be 'ad hoc' as it is not easy to offer profitability-linked incentives to senior bankers when heads of other public sector undertakings are not getting such benefits," said a North Block official.

The salaries of the CEOs of State Bank of India (SBI), Industrial Development Bank of India (IDBI), Nabard and a deputy governor of the Reserve Bank of India are now linked to the salary of a secretary in Government of India.

The salaries of other PSU banks' chairmen are linked to that of a special secretary, while an ED's salary is linked to a joint secretary's. A senior bank chairman's monthly salary is about Rs 45,000.

Besides, he is entitled to a furnished house, medical reimbursement (full reimbursement for him and 75 per cent for his family members) and a car for personal use up to 400 km a month.

There are three components of a bank chairman's salary "" basic, dearness allowance (DA) and city compensatory allowance (CCA). Typically, a senior chairman's basic (with 50 per cent of DA merged with it) is Rs 39,000 a month.

This is also the ceiling and once a CEO hits this ceiling, he is not entitled to his annual increment of Rs 500 any more. Some senior general managers of PSU banks earn a higher salary than the EDs.

Chairmen also get pension based on their last salaries drawn as bank employees. Since a chairman's post does not carry any pension benefit, after retirement, a CEO continues to get a pension of Rs 10,000-12,000 a month, based on his last salary drawn as a general manager.

"We play the role of a missionary. You cannot manage a balance sheet of over Rs 1 lakh crore with a Rs 30,000 monthly salary (net of taxes and other statutory deductions) unless you are convinced that you are doing a charity. If the ministry empowers bank boards to give incentives to us, it is good news," said a PSU bank CMD.

"The incentives to be offered to CMDs and EDs will not be directly linked to profitability. We will not specify a percentage of profits that can be given as incentives to CEOs. Let the boards start offering money on an 'ad hoc' basis until a transparent incentive mechanism is worked out," the finance ministry source pointed out.