Money & Banking

Banking on performance

G. Naga Sridhar Hyderabad | Updated on November 13, 2017 Published on August 16, 2011


The rules of the game are changing for public sector bank staff. A number of banks are rolling out performance-based incentives for their officers and clerical staff numbering about 10 lakh.

This, feel experts, would to ‘better' the performance of the PSBs.

‘Structures incentives'

“We are in the process of formulating a scientific system to encourage performance by structured incentives which will be implemented soon,” Ms Archana Bhargava, Executive Director, Canara Bank, told Business Line. Banks can spend at least one per cent of their profits on performance incentives, she added.

The incentives can be for better recoveries, augmenting fee-based income by selling products, such as insurance, and meeting targets in credit growth and mobilisation of deposits, said Mr M. Narendra, CMD, Indian Overseas Bank.

Mr R. Ramchandran, Chairman and Managing Director, Andhra Bank, said it would be for the board to decide on the form and scope of performance-linked incentives. “We do have a system in place already. Any changes will be decided by the board,” he added.

‘Challenging' environment

The reasons for the focus on performance are the ‘challenging' environment for the banking industry which faces the possibility of rising bad loans and the need to retain young talent with a large number set to retire over the in the next couple of years.

Last year, the Anil Khandelwal Committee had suggested that banks do away with wage boards and focus more on performance.

According to a senior State Bank of India official, the ‘performance boosters' might, for the moment, run alongside the existing system of wage boards that recommend salary increases across the system.

View of unions

Bank unions are against a wholesale switch to performance-based hikes. “Public sector bank employees are engaged in social banking and also make some sacrifices in the process. It is not correct to completely link incentives/salary hikes to profits. We support a common system for everybody,” Mr Peddi Sudhakar, Joint General-Secretary, All India Bank Officers' Confederation, said.

Published on August 16, 2011
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