In a bid to enable banks to sufficiently attract qualified competent individuals on their Boards, the Reserve Bank of India (RBI) has revised upwards the ceiling in respect of remuneration of Non-Executive Directors (NEDs), other than the Chair of the Board, to ₹30 lakh per annum from ₹20 lakh.
The aforementioned revised ceiling is applicable to NEDs of private sector banks, including Small Finance Banks (SFBs) and Payment Banks (PBs), as also the wholly owned subsidiaries of Foreign Banks. Instructions in this regard have come into force with immediate effect.
“Considering the crucial role of NEDs in efficient functioning of bank Boards and its various Committees…it has been decided to revise the aforementioned ceiling to ₹30 lakh per annum,” RBI said.
Suitable criteria
The central bank emphasised that banks are required to have suitable criteria for granting fixed remuneration to their NEDs, with the approval of their Board before any review of the extant remuneration.
The Board of the bank may fix a lower amount within the ceiling limit of ₹30 lakh per annum depending upon the size of the bank, experience of the NED and other relevant factors.
“As hitherto, private sector banks would be required to obtain regulatory approval regarding remuneration to Part-time Chairman…
“Banks are required to make disclosure on remuneration paid to the directors on an annual basis at a minimum, in their Annual Financial Statements,” RBI said.