The Telegraph
Since 1st March, 1999
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Pay review for bosses of PSU banks

Calcutta, July 21: The salaries and pensions of public sector bank chairmen and executive directors will be reviewed within a fortnight by the finance ministry.

The move is a response to Indian Banks’ Association’s (IBA) efforts to raise their compensation levels. “We have opened talks with the finance ministry on the issue. Things will become clear in 15 days,” chief executive of the association, H.. Sinor, said.

Senior ministry officials said they were in the midst of informal discussions on the problem, which primarily stems from the fact that private sector bank heads get salaries much higher than their counterparts in the public sector. “The task of a public sector bank chairman is more onerous. He has to bring down the huge non-performing asset to levels permitted under prudential norms. He also has to keep a close eye on the massive network of branches,” sources said.

One of the problems is that a chairman’s pension is calculated on the basis of the basic salary as a general manager. Promotions to the post of executive director, managing director or chairman are deemed to be government appointments and, hence, as good as retirement.

One must spend 33 years in a bank to be entitled to pension. The time spent as executive director and in other top-rung posts is not included in the service period. For example, if a banker has completed 22 years of service, his pension would be 22 divided by 33.

Bankers on the verge of retirement have approached the IBA, asking the association to take up anomalies in pension calculation with the finance ministry.

The salary structure of public sector bank chairmen, too, falls short of what they think it ought to be. CMDs and executive directors of public sector banks balk at a pay equal to that of an assistant vice-president — a junior management grade employee with possibly one to three years’ experience — in a private sector or foreign bank. Especially, when the nature of the responsibilities cannot be equated on any count.

The disparity grows wider at higher rungs in private and foreign banks when the take-home money is just not the base salary, but includes perks and stock options.

The mismatch was also highlighted in the report of the Narsimham Committee on banking sector reforms. “Remuneration levels of chief executives of banks and financial institutions fall far short of what is being offered to their counterparts in the private secto,” the report, which was prepared in 1998, stated.

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