Business / RBI proposes new compensation norms for top officials of private, foreign banks

The RBI Monday proposed that at least 50 per cent of compensation of senior officials of private and foreign banks, including whole time directors and chief executive officers, "should be variable". The proposed guidelines also said minimum 50 per cent of variable pay is to be via non-cash component while mandating a compulsory deferral mechanism for variable pay, regardless of quantum of variable pay.

In January 2012, the Reserve Bank had issued the compensation guidelines for implementation by private sector and foreign banks from the financial year 2012-13.

"These (2012) guidelines are being reviewed, with an objective to better align with FSB (Financial Stability Board) Principles and Implementation Standards, based on experience and evolving international best practices," the RBI said while inviting comments from stakeholders by March 31.

The proposed guidelines, to be effective from the ensuing financial year (post issue of the final guidelines), further said, "Variable pay is to be capped at 200 per cent of fixed pay."

As per the extant guidelines, the variable pay is capped at 70 per cent of fixed pay but did not include ESOPs.

The proposed guidelines also said minimum 50 per cent of variable pay is to be via non-cash component while mandating a compulsory deferral mechanism for variable pay, regardless of quantum of variable pay.