Concerned over low salary structure in PSU banks, the Reserve Bank of India on Tuesday said that in the absence of suitable compensation package they would lose talent to private sector lenders.
"The executive compensation in the public sector, as is well known, is lower than that in the private sector. If public sector banks are required to compete with private sector banks on a level playing field, there is a good case for compensating them too on a competitive base," RBI Governor D Subbarao said at a conference organised by IBA and Ficci.
Incidentally, Subbarao gets a meagre about Rs 15 lakh (Rs 1.5 million) a year compared to packages worth crores for CEOs of private sector banks like ICICI Bank, HDFC Bank and Yes Bank.
"There is a good reason to revise their (PSU bank executives) compensatory packages. . . There is also a risk that if the public sector bank compensation is not improved, the public sector may lose talent to the private sector," Subbarao said.
Among the public sector lenders, State Bank of India chairman OP Bhatt got a total remuneration of Rs 26.5 lakh (Rs 2.65 million) during 2009-10.
In case of private sector lenders, HDFC Bank managing director Aditya Puri earned Rs 3.40 crore (Rs 34 million) in 2009-10, while ICICI Bank MD and CEO Chanda Kochhar's pay package stood at Rs 2.08 crore (Rs 20.8 million) during that fiscal.
Shikha Sharma, who left ICICI Bank Group to join as MD and CEO of Axis Bank, also earned Rs 1.52 crore (Rs 15.2 million)
in the last fiscal.
Others getting more than Rs 1 crore (Rs 10 million) included new generation private sector lender Yes Bank's chief Rana Kapoor (Rs 1.28 crore) and Kotak Mahindra Bank's MD Uday Kotak (Rs 1.13 crore).
Besides, according to a recent analysis of salaries paid to top officials of RBI and of banks licensed by it to do business in the country, Subbarao's total remuneration is less than not only the chiefs of private sector banks, but also most of the public sector lenders.
The gap is huge gap with salaries of some of the bank chiefs being over 20-times of what is paid to RBI Governor and its four Deputy Governors.
While RBI Governor gets an annual gross salary of little over Rs 15 lakh, Deputy Governors get around Rs 13 lakh (Rs 1.3 million) per annum.
In comparison, at least 14 top executives at various private sector banks got an annual remuneration of more than Rs 1 crore in the last fiscal ended March 31, 2010.
Public sector banks account for nearly 70 per cent of the country's banking sector where compensation is determined by the government.
As regards the private and foreign banks, the compensation packages are approved by the central bank. "RBI has historically ensured that the compensation is not excessive, is consistent with industry norms, is aligned to the size of the bank's business and that the variable pay component is limited," Subbarao said.
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Concerned over low salary structure in PSU banks, the Reserve Bank of India on Tuesday said that in the absence of suitable compensation package they would lose talent to private sector lenders.