Money & Banking

Pay disparity in banks: Rajan is right on the money

K Ram Kumar Mumbai | Updated on January 17, 2018 Published on August 18, 2016

NEW DELHI, 11/12/2013:INDEX: Mr. Raghuram G. Rajan, Governor, Reserve Bank of India in New Delhi, Wednesday, Dec 11th 2013. Photo: Meeta Ahlawat

Reserve Bank of India Governor Raghuram Rajan was spot on when he said pay scales in public sector entities, including public sector banks, are lopsided.

A BusinessLine reality check showed that public sector bank employees, up to the middle management grade, have a higher salary when compared to their private sector counterparts. But PSU salaries aren’t competitive at higher levels.

An entry-level officer in a public sector bank, for example, draws almost 50 per cent more than his private sector counterpart. But by the time the executive reaches higher levels, his pay package starts to lag. Some private sector bank CEOs draw almost 30 times higher salary than their public sector counterparts.

In highlighting the issue of disparity in pay scales between public and private sector banks, Rajan was probably echoing what the PJ Nayak Committee to Review Governance of Boards of Banks in India underscored. The committee cited “significant and widening compensation differences with private sector banks, leading to the erosion of specialist skills” as one of the several externally imposed constraints on public sector banks.

On a cost-to-company basis, the salary of a probationary (entry level) officer with a public sector bank is about ₹6 lakh a year. The same in the case of a private sector bank is about ₹4 lakh a year.

But at the CEO level, the situation reverses. A comparison of the balance sheet size managed and salary drawn by the chiefs of India’s largest bank and India’s largest private sector bank accentuates the differences.

State Bank of India Chairman Arundhati Bhattacharya, who managed a standalone business (deposits and advances) of ₹31.94 lakh crore as on March 2016, drew a gross salary of ₹31.10 lakh in FY2016. ICICI Bank Managing Director & CEO Chanda Kochhar, who managed a business of ₹8.56 lakh crore as on March 2016, drew a salary of ₹4.79 crore.

In FY2016, Aditya Puri, Managing Director & CEO, HDFC Bank, drew a gross salary of ₹9.32 crore, about 30 times more than the SBI chief did.

JN Misra, Chief Executive Officer, Indian Institute of Banking & Finance, said, “Up to Scale III (Senior Manager), salaries in public sector banks are better than in private banks. From scale IV (Chief Manager) onwards, that trend is reversed. And as you go up, this difference becomes wider.

To be competitive, he added, public sector banks must be free to recruit from outside and pay market-basedsalaries.”

Published on August 18, 2016

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