India’s highest-paid bankers are from non-banks. And RBI can’t do much about it.

Abhay Bhutada, the recently retired chief of Poonawalla Fincorp, is India’s highest-paid banker.
Abhay Bhutada, the recently retired chief of Poonawalla Fincorp, is India’s highest-paid banker.


  • Chiefs of non-banking financial companies are among the highest-paid in India's lending sector, trumping even the bosses of the country's largest banks. But even among those non-banks, the highest earner turned out to be a surprise.

MUMBAI : India’s highest-paid banker isn’t Sashidhar Jagdishan, chief of the country’s largest private lender, HDFC Bank Ltd. That title goes not to Rajeev Jain, the CEO of India’s largest non-bank, Bajaj Finance Ltd, but to Abhay Bhutada, the recently retired chief of a small Pune-based lender called Poonawalla Fincorp Ltd.

Shadow banks such as Poonawalla Fincorp and Bajaj Finance have been able to shower their bosses with hefty salaries, bonuses and stock options as they reap the rewards of robust business growth. This has been possible also because the CEO salaries of non-banking financial companies are outside the purview of India’s banking regulator. But that may be about to change.

The average salaries of the CEOs of shadow banks increased more than that of their peers at private banks, according to aMintanalysis of annual reports for fiscal year 2022-23 and those published so far for 2023-24.

This has the Reserve Bank of India worried, and it may bring the salaries of key managerial personnel at NBFCs under its oversight, as per a Business Standard report. While this couldn’t be independently established, RBI had signalled similar intentions earlier, asking NBFCs to establish a board-approved compensation policy.

If RBI is going to cap CEO salaries, I don’t know how it will help... these top officials take more responsibilities, and this risk-taking warrants that kind of compensation.”

“RBI has not gone into NBFC compensation because the salaries of a majority of the NBFCs are not a worry. In exceptional cases, RBI can have supervisory discussions," said R. Gandhi, a former RBI deputy governor. “Also, NBFCs are under the RBI Act, which does not have a direct provision relating to regulating the compensation of CEOs."

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NBFCs, understandably, are perturbed about the possibility of RBI intervention in their pay structure.

“NBFCs are not constrained by the limitations of a bank. It is market-driven and competitive from an NBFC perspective," said Geetha Menon, human resources head at IIFL Group. “If RBI is going to cap CEO salaries, I don’t know how it will help considering these top officials take more responsibilities, and this risk-taking warrants that kind of compensation."

Nirmal Jain, CEO of IIFL Finance Ltd, received a salary of nearly 10 crore during fiscal year 2023. That’s about how much HDFC Bank’s Jagdishan earned that year.

A study in contrasts

In 2023-24, Rajeev Jain, CEO of Bajaj Finance, which has about 3.3 trillion in assets under management, took home a total salary of 102 crore, including employee stock options and sitting fees. In the year prior, he was paid 49 crore.

In contrast, Jagdishan of HDFC Bank, which has a loan book of 24 trillion, earned 34 crore during fiscal year 2023, including stock options.

On average, the chiefs of upper-layer NBFCs, handling assets of more than 1,000 crore, were paid between 3 crore and 20 crore in fiscal years 2023 and 2024, excluding allowances and stock options,Mint’s analysis shows.

The average remuneration of private bank CEOs was between 3 crore and 10.5 crore, excluding stock options.

Rajeev Sabharwal of Tata Capital Ltd received 19 crore, including stock options and other allowances, during 2023-24. Vishakha Mulye, CEO of Aditya Birla Finance, received 17 crore, excluding variable pay, in FY23, and Gagan Banga of Indiabulls Housing Finance Ltd nearly 10 crore.

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Even smaller NBFCs showered their bosses with hefty salaries.

Abhay Bhutada, former CEO of Poonawalla Fincorp, earned a total remuneration of 241 crore, including share payment, in fiscal year 2024, and 78 crore in the year prior, similar to what hispeers in India’s information technology sector are paid. Poonawalla Fincorp has a loan book of 24,036 crore.

Bhutada retired as managing director and CEO of Poonawalla Fincorp on 23 June.

His successor Arvind Kapil, who joined the non-bank lender from HDFC Bank, is entitled to a fixed pay of 7 crore, a one-time joining bonus of 40 crore, and stock options worth 80 crore at the market price on the date of his joining.

Among bank chiefs, Sandeep Bakshi, MD and CEO of ICICI Bank Ltd, earned 14.8 crore during FY23, while Axis Bank’s Amitabh Chaudhry earned 21 trillion in FY24. Dinesh Khara, chairman of the State Bank of India, the country’s largest public sector lender, received a fixed pay of 39.4 lakh, excluding stock options, in 2022-23.

The spectre of RBI oversight

As per RBI’s regulations, banks are governed by the Banking Regulation Act, which requires the boards of lenders to seek regulatory approval for CEO appointments and their salaries. This doesn’t apply to non-banks, which are governed under the RBI Act and are not required to seek such approval.

But following the collapse of Infrastructure Leasing and Financial Services (IL&FS) in 2018 and of Dewan Housing Finance Ltd the following year, RBI began tightening regulations for non-banks, focussing on capital requirements and governance standards.

The regulator introduced a scale-based regulatory framework under which NBFCs are divided into four categories based on their size, activity and perceived risk.

According to the company law, salaries of all directors are capped at 10% of the profit. Why then go beyond and micromanage this?

In 2022, RBI also laid down guidelines on the compensation for key management persons and other senior executives at NBFCs. While it didn’t prescribe a cap on the compensation, it directed middle- and upper-layer NBFCs to put in place a board-approved compensation policy.

This includes setting up a remuneration committee, principles for fixed-variable pay structures, and claw-back provisions.

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Over the previous four years, RBI has increased scrutiny over the compensation of private bank CEOs to prevent excessive risk-taking. Its guidelines mandate a cap on variable pay at not more than 200% of the fixed pay, with a minimum of 50% of the variable pay in the form of employee stock options or share-linked instruments.

In January,Mint reported that in several cases RBI had refused to approve pay hikes for senior bank executives, delayed approving higher remuneration, and even directed an outright pay cut, leading to senior management exits.

Non-bank lenders don’t want a similar fate upon them.

“According to the company law, salaries of all directors are capped at 10% of the profit. The company law regulates this. Why then go beyond and micromanage this?," said Srinivasan Raghavan, former managing director of Sundaram Finance Ltd. “That said, the salaries cannot be obscene."

A dream to achieve

Recruitment firms and human resource executives say NBFCs are willing to pay salary hikes of 20-40% for senior executives owing to their rapid growth. According to RBI, the total credit extended by NBFCs represented about one-fourth of the magnitude of bank credit as of March 2023, up from about one-sixth in 2013.

This has been possible in part because of the ability of non-banks to attract top-calibre talent.

The CEOs of NBFCs who earn higher compensation have been with firms for a long time and have delivered value, which is reflected in the profitability of the companies.

“While the central bank has started looking at the compensation of NBFCs, they (the non-banks) still have enjoyed a flexible approach so far," said Monica Agrawal, managing director, financial services-Asia Pacific, at consulting firm Korn Ferry.

“The CEOs of NBFCs who earn higher compensation (including stocks) have been with firms for a long time and have delivered value, which is reflected in the profitability of the companies. The criterion for the compensation is the compounding impact of value over the years," she added.

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With the Indian economy expected to grow at 7% this financial year, NBFCs are expected to see strong loan growth. In a speech on 9 February, RBI deputy governor Rajeshwar Rao said, “It’s time that the NBFC sector comes out of its own shadow as well as that of the banking sector. I am sure that NBFCs will play a significant role in achieving the dream of a $5-trillion economy going forward."

To achieve that dream, the question remains if RBI will continue to allow non-bank CEOs to also dream of a higher pay.

Devina Sengupta contributed to the article.

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