Public sector bank bosses now have reason to perform better. If they score well on the 16 performance parameters set by the finance ministry, they can make as much as Rs8 lakh per annum. This is an increase of 60% from their annual salary of Rs5 lakh.
An executive director of a public sector bank will now get up to Rs6.5 lakh if he scores 100% on all the parameters.
According to a letter sent by the finance ministry on 9 March, a remuneration committee is to be set up by each public sector bank. This committee will comprise one government nominee, one RBI representative and two banking industry experts. The bonus package will be awarded in retrospect from the fiscal 2006.
As first reported by Mint on 1 February, the top five achievers among the public sector banks measured by their performance in 2005-2006 are Indian Overseas Bank, Indian Bank, Canara Bank, Punjab and Sind Bank, and State Bank of Hyderabad.
Even those bank chiefs and executive directors who score upto 80-90% get an annual compensation of Rs7 lakh and Rs5.5 lakh, respectively, and for scores over 60%, the chairmen and executive directors will get up to Rs 6 lakh and Rs 4 lakh a year.
These incentives will be based on the performance in five key areas: credit growth, deposit mobilization, quality of assets and recovery of non-performing assets.