A letter to public sector bank bosses, written on December 14 by GC Chaturvedi, joint secretary (banking and insurance), department of economic affairs in the finance ministry, says: "Instances have come to notice that some of the banks have introduced incentive schemes for the grant of cash incentives to the employees/officers for achieving the defined targets. On viewing the matter in its entirety, it has been decided that all such proposals for introduction of incentive schemes may be put on hold forthwith till further advice."
In Mumbai alone three banks - the State Bank of India, Bank of Baroda and Union Bank - have put in place pay incentives. Across the country, the number swells. All such schemes are now on hold.
"What was the point in giving us managerial freedom if we cannot exercise it? We cannot offer market-related salaries to our employees. We need to reward those who achieve their targets. What is wrong with that?" wondered a bank CEO.
An industry consultant said the government had made bank boards redundant by this step. Senior bankers fear trade unions may have raised the bogey of worsening industrial relations with the finance ministry. Others pointed out some banks had misused the freedom, forcing the ministry to take a closer look at their schemes.