Chief executive officers of public sector banks (PSBs) earned thrice as much as the ‘average employee’ in the company in FY21, while those leading small finance banks (SFBs) earned 75 times more than the average pay, according to the Reserve Bank of India (RBI).
As for the compensation paid to a private sector bank’s (PVB) CEO, it was 67 times more than the average employee.
This figure was lower for foreign banks (FBs), where the average remuneration received by employees is relatively high. ‘Average employee pay’ is calculated as the ratio of total staff costs to total employee strength.
Profitability post-merger
The CEO compensation versus the salary of an average employee varies greatly across different bank groups, the RBI said in its Trend and Progress of Banking in India 2020-21 ’ report.
The variation across bank groups remained unchanged through 2018-19 and 2019-20.
RBI cautions
According to the revised guidelines on compensation — effective from April 1, 2020 — the compensation of CEOs, wholetime directors and ‘material risk takers’ must be adjusted for all types of risks, their outcomes and time horizons.
“Moreover, the mix of cash, equity and other forms of payment must be consistent with risk alignment, wherein the variable pay component should be in the range of 50- 75 per cent of the total pay, a minimum of 60 per cent of which should be under deferral arrangements,” the RBI said.
Variable pay capped
The cash component of the variable pay is also capped at between 33 per cent and 50 per cent under the revised guidelines.
In case the variable pay is up to 200 per cent of the fixed pay, a minimum of 50 per cent of the variable pay should be via non-cash instruments; and in case the variable pay is above 200 per cent, a minimum of 67 per cent of the variable pay should be via non-cash instruments.
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