Financial Daily from THE HINDU group of publications
Saturday, Jul 05, 2003
Public Sector Banks
Money & Banking - Trends
PSU banks' top brass less pay, more pressure
CHENNAI, July 4
``IN another two to three years, when I retire, you may see me going on a bicycle", says the Chairman and Managing Director of a large public sector bank. There is both sarcasm and a trace of bitterness in the voice. The CMD was responding to a query on what should be done about the pay scales for top management in public sector banks. It is a touchy topic and can often set off a raw nerve among top executives in public sector banks.
The need for some thinking on the issue was highlighted in a recent speech at the Syndicate Bank annual general meeting, by its Chairman and Managing Director, Mr Michael Bastian, who said ``In the changed scenario where equations are re-drawn, should we continue with the industry level wage negotiations even for senior officers and executives? The time has come for the idea that CEO/COO/CFO wages should be fixed by the board?''
Mr E. Balaji, General Manager, Ma Foi Consultants Ltd, a HR consultancy organisation says, ``In the context of introducing corporate governance standards as well as attracting talent through lateral entry at senior levels, remuneration levels in public sector banks need to be hiked".
Mr S.C. Gupta, CMD, Indian Overseas Bank, concurs with this view. He says, ``There is an urgent need to revise pay packet of public sector bank chief executives to reflect the increasing risk profile. The remuneration is not commensurate with the pressure of the job.''
Browse through the annual reports of a couple of banks and you get the picture.
For instance, Mrs Ranjana Kumar, Chairperson & Managing Director, Indian Bank, earned Rs 5.55 lakhs in 2002-03 for her exertions. Her bank does a business of nearly Rs 40,000 crore and earned a profit of Rs 188 crore last year. Mr V. Leeladhar, Chairman and Managing Director, Union Bank of India, got a remuneration of Rs 5.06 lakhs in 2002-03. He heads a bank which does business of over Rs 70,000 crore and earned a net profit of Rs 552 crore last fiscal. Similarly Mr S.S. Kohli of Punjab National Bank drew Rs 5.33 lakhs last year while his bank's business volumes crossed Rs 1,16,000 crore and earned a net profit of Rs 842 crore.
``The sight of a CMD or Executive Director in public sector taking home just as much as the Assistant Vice-President (a junior management grade employee with possibly one to three years experience) in a private sector/foreign bank is not an edifying spectacle when the nature of the responsibilities simply cannot be equated. The disparity, of course, only grows wider at higher levels in the private/foreign banks when not only the base salary but also the perks and stock options get thrown in,'' says Mr Balaji.
This point was also made in the Report of the Committee on Banking Sector Reforms headed by Mr M. Narsimham, in 1998. It said, ``With regard to the remuneration levels of chief executives of banks and financial institutions, these now fall far short of what is being offered to their counterparts in private sector. Many of our public sector banks are now accessing both the domestic and international markets for capital. Investors often take a dim view of the comparatively low levels of remuneration of chief executives of public sector banks and their perception of the quality of the chief executives also indirectly suffers.'' It went on to add that ``the committee feels that there is now a need to delink the pay scales of the chief executives of public sector banks and financial institutions from the Civil Service pay scales and that this should be left to be decided by the individual banks not excluding the possibility of performance-based remuneration.''
Like many other recommendations, these too gather dust. After all the Civil Service has to accept it and be willing to let go!
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