RBI issues new compensation norms for private, foreign bank honchos

TIL Desk/Business/Mumbai/ The Reserve Bank on Monday issued compensation guidelines for whole-time directors and chief executives of foreign, private, small finance, payments banks and local area banks mandating the cash component of variable pay at 67 percent.

Banks should continue to formulate and adopt a comprehensive compensation policy covering all their employees and conduct annual reviews, RBI said, adding the new guidelines will be effective next April. The regulator said if the variable pay is up to 200 percent of the fixed pay, at least 50 percent of it should be in non-cash, and if the variable pay is above 200 percent, 67 percent of it should be paid via non-cash instruments.

It also wants banks to claw-back the non-variable pay components if there is divergence in provisioning for NPAs or asset classification exceeds the prescribed threshold for public disclosure. “The policy should cover all aspects of the compensation structure such as fixed pay, perquisites, performance bonuses, guaranteed bonuses, severance package, share-linked instruments like employee stock option plans, pension plans, and gratuity,” RBI said in a notification.