Senior bankers' pay to come under RBI lens

The Reserve Bank of India's proposed guidelines on bank executives' compensation will be extended beyond just CEOs to all senior executives in private and foreign banks, especially those involved in treasury functions.

Sources close to the development told Business Standard that the move was in line with discussions held at G20 ministerial and central bank levels. RBI intends to use recently-endorsed principles laid out by the Financial Stability Board (FSB), a global regulatory and supervisory body under the G20, to work out the new norms

G-20 is an informal forum of finance ministers and central bank governors in key industrialised and developing economies to discuss key issues in the global economy. It was established in 1999.

The FSB principles, released in September, suggested bank regulators step in to limit bonuses to a percentage of net revenue if an entity did not have a sound capital base. They also recommended that bonuses be deferred till banks regained financial health.

At present, India's banking regulator approves the appointment and compensation packages of CEOs of private and foreign banks. As standard practice, RBI insists that the compensation package is linked to the bank's size and performance.

To cover more executives going forward, banks are being asked to formulate a compensation policy and ensure that any senior-level appointment is in line with the policy.

Switzerland is the latest to announce measures to limit bank compensation though no limits were imposed on bonuses.