Public sector bank chiefs will soon have a reason to smile. The finance ministry is expected to announce a performance-based incentive scheme for bank chairmen on Tuesday.

As per the new scheme, a bank chairperson will get extra Rs 8 lakh (Rs 800,000) per annum over and above what he gets if targets are met fully. If the target is met 81-99 per cent, then a chairman will get Rs 7 lakh (Rs 700,000) per year and Rs 6 lakh (Rs 600,000) if the target is met 61-80 per cent.

That means a chairman who gets a paltry Rs 5 lakh (Rs 500,000) a year under the pay scale system, will either take home Rs 13 lakh (Rs 1.3 million) or Rs 12 lakh (Rs 1.2 million) or Rs 11 lakh (Rs 1.1 million) per annum, depending on their performance.

Bank executive directors are also likely to get between Rs 2 lakh (Rs 200,000) and Rs 5 lakh (Rs 500,000) extra depending on the performance in meeting various targets.

The assessment will take into account performance on 16 different parameters such as profitability, deposits, loans, loan recovery, non-performing assets, priority sector lending and agriculture lending.

This incentive system was necessary to encourage the brass and reward those who perform and deliver results, said official sources.

Though state-run bank chiefs enjoy substantial perks such as accommodation, there is a huge difference in terms of salary compared with their private sector peers.