Incidentally, all three banks have recently hired CEOs from outside their ranks. Shikha Sharma, for instance, joined Axis Bank, the third largest private bank in India, as its Managing Director and CEO from ICICI Prudential Life Insurance Company where she was the Managing Director and CEO.
Murali Natrajan has joined as CEO of Development Credit Bank from Standard Chartered Bank where he was the global head for SME (Small and Medium Enterprise) banking. Gautam Vir is yet to join ING Vysya Bank following the RBI’s objection. He was CEO of Development Credit Bank earlier.
The RBI derives its powers to intervene on issues such as compensation of bank CEOs from the Banking Regulation Act. In fact, the Act empowers the RBI to even issue directions to banks to fix salaries at certain levels.
In the case of Shikha Sharma, the central bank did not find her new compensation package justifiable. It has written back to the bank suggesting an alternate and “acceptable” package. Sharma refused to comment but confirmed that the RBI did not agree with the package originally offered to her by Axis Bank. Vir and Natrajan were unavailable for comment.
When contacted, an RBI spokesperson said the central bank would respond only tomorrow.
The salaries of the CEOs, decided by their boards, are not known. But Sharma, who joined Axis Bank yesterday, had an annual salary package of about Rs 2.03 crore in her previous job at ICICI Pru Life Insurance Company, according to an ICICI bank executive. Vaughn Richtor, who retired as ING Vysya’s CEO recently, had an annual salary of Rs 1.1 crore.
At ICICI Pru, Sharma was in the same salary bracket as Chanda D Kochhar, the new MD and CEO of ICICI Bank, the latter’s annual cost to company being Rs 2.05 crore, which was approved by the RBI in February this year.
Kochhar’s predecessor KV Kamath had an annual salary of Rs 2.8 crore. Now he gets an honorarium of Rs 20 lakh a year as ICICI Bank’s non-executive Chairman.
Though the RBI does not have clear guidelines or parameters on CEO compensation in banks, it is said to be guided by the size of the banks. Multinational banks, though under RBI’s regulatory framework, escape such strictures. In India, according to a banker in a top private bank, the CEO salaries can be broadly categorized thus: Rs 1 crore for public sector banks; Rs 2-3.5 crore for private sector banks and Rs 8-9 crore for foreign banks.
Sources said the RBI cites the public outrage in the US against banking CEOs’ salaries and subsequent moves on salary caps. However, US salaries (which include bonuses and stock options) run into millions of dollars. And the caps imposed apply to only those banks that have used taxpayers’ money for a bailout.
RBI did the right thing. Serious imbalances should not be created in the industry. We should not reach a situation like in the US where the US Fed had to impose such restrictions following the creation of toxic assets by such highly paid executives ignoring shareholders' interests. Any pay packet above Rs.50lakhs and perks above Rs.50lakhs and the numbers in such brackets, should be placed before the AGM for clearance so that the shareholders would legitimise the engagement of such high-rise pays and the eventual dip to that degree in their own dividends. There must be industry norms for pay and perks of CEOs and the RBI can perhaps appoint a Committee with IBA in the lead to fix them.
Mr Rajesh aptly puts it as "Handful of goons loot the country's resources. Do we know Ex CEO
being an ex head of SME banking moving from singapore, murali at DCB would not have come for less than 4 cr as that was a primary motivation to move out of a role he was hardly 6 months new in.
Is the Chairmen of Public Sector Banks (PSBs) any worse than their Private Sector counterparts? Chairman of SBI gets a basic salary of 26000/pm,of Bank of Baroda 25000/-pm.,of IDBI 26000/-pm.One may wonder what is special in Shikhas,Nainas et all to deserve 100 times more?It can be argued in Public sector there is no limit of bribes and sundry perquisites.PSB Chairmen loot and scoot no responsibility immunity from criminal action.If CBI wants to take action they need prior permission from Politicians.
RBI needs to evolve parameters on the CEO salary instead of fixing the hard numbers like Rs 2 crore etc. For example CEO (or any individual) salary can not be more than 100 times that of the average salary of the employees in that company. Company performs well because most of the employees perform well, not because of CEO alone. RBI could tweak it based on number of employees or revenue or profit too. Say if the number of employees is less than 1000 the salary of CEO could be maximum of 100 times that of the average salary, if it is more than that it could be 150 times of the average salary etc. Certainly US model of not controlling the salary is not working as board of directors sit in many boards and form a buddy-buddy system.
If one looks at the salaries being received by CEOs of some of the banks, he or she will be shocked. When millions of people in India are struggling to see both ends meet, a handful of goons are looting the country's resources. What is so great about these CEOs that they deserve to be paid so much. The entire work is done by officers and cadre below then and the credit goes to the top fellows. Anyone on the road knows how these banks fool people and trap them and later fleece them to collect interests. Its high time the government should put a stop to such practises. Even after the banking crisis in US, India will never learn. Most of the CEOs are taking huge bonuses and perks while banks in Americas collapsed leaving no trace. The day is not far off India will also see the same fate if this looting continues.
RBI is definitely justified. It is such high rewards that lead to high risk taking resulting in the collapse of the institution. RBI needs to be especially concerned about golden parachutes that guarantee rewards for even leaving an institution. American and British style banking where the management loot both the customer and the shareholders is not required here though most of our MBAs dream of just this.
The grapes are sour anyway!"Angoor Khatte Hain"-> MBA
I think we should not dismiss the regulators action without understanding what hte pay details were. They are noramlly very sure of their actions. we have seen the US example where too highly paid ceo's varioable bonus caused system crash...good going by rbi
The Board of Directors of a company are empowered by their shareholders to fix salaries of the Directors. Why is RBI intervening in these executive decisions? CEO salaries whcih have been cited at 2-3 crores are reasonable and not excessive. The amount of responsibilities they carry is enormous and they deserve such salaries if not more. RBI's intervention in such matters will deprive private banks of really good talent and will ultimately kill private banking because no person with such high skill would like to work when they are not paid what is their due. Don't forget the corruption in PSU banks which largely offsets their paltry salaries in comparison to private banks. RBI is better off regulating banking business instead of presiding the demise of private banking.
Back to socialism! Jai Ho!
Is it a case of 'sour grapes'? What is the CTC salary of the guys in RBI who take such decisions?
Regulatory authority is meant to rectify anomalies like this. How can the package be fixed at abnormally high levels? What is the justification for that? Just to attract a few individuals offering any package is not right. Abnormal packages have doomed many banks and industries is a known fact. No bank or industry should earn at the cost of user i.e. charge the user more than what should have been charged if proper costing is done and a clear ethical policy is put in place. Just becasue of demand costs should not be hiked.
After all it is white, What about the corruption in Govt. jobs ? In some plum departments they generate huge black money. RBI is wrong.
What about pay cuts for banks like ICICI where salaries are increased and they are not able to reduce the home loan interest rates?Why is the RBI not asking thee banks to reduce the costs?
This is a alassic case of government still having a irrational and feudal mindset..and getting there nose into issues that should not be of there concern at all. The RBI's job at best is to regulate the fees and terms that private banks charge and impose on there customers, thats all.It has no buisness otherwise to tell how the private sector manages its own finances. This directive is really laughable coming from the government sector with such a pathetic record of managing tax-payer funds. Perhaps the RBI honchos are feeling jealous of the pay hardworking private sector folks make and feel free to interfere in areas that should be of no concern to them. Its amazing how petty India's top government officials can be.
Mr. yb, General Elections are over, IE is convinced that there is no need to go all out and make false propaganda against BJP and Hindus for the next 5 years! So, IE will go and take any petty cases to report, whether they are old or new!
seems to be very old news!why reported today!!
It is not fair on the part of the regulatory authorities to effect cuts once the appointments have been made based on understanding between the individuals concerned and the respective banks.Let the norms be laid down before the offer is made by concerned banks for appointment of CEOs.Merely because the regulatory authorities have necessary powers they should not resort to such cuts.Will they(regulatory authorities) suggest increase in salaries if performance of these banks pick up later?