State-owned banks may soon be looking at a differential pay structure

State-owned banks may soon be looking at a differential pay structure, based on profitability.

“The performance of all public sector banks is not the same.
There is a need for bank-wise pay revision based on performance, productivity and efficiency,” K C Chakrabarty, deputy governor of Reserve Bank of India, told DNA.

The suggestion could cheer the staff of banks that rank higher in terms of profitability - a key measure of performance.
Their pay packets could be much bigger than those of counterparts at less profitable banks.

For example, an assistant manager at State Bank of India (SBI) could get a much higher salary than an assistant manager at Central Bank of India, which posted profits of Rs 9,123 crore and Rs 571 crore, respectively last fiscal.

According to Chakrabarty, it is only after such a structure is put in place that public sector banks might agree to a variable pay regime under which 70% of the salary will be fixed and the rest will vary depending on the performance of the employee.

Experts feel such a move will help public sector banks compete more effectively with private sector banks.

“Each bank’s capacity to remunerate its staff differs with the bank’s performance. If this move is brought in place, then banks with good performance and profitability will be in a position to gather the best talent and will be able to compete better with private sector banks,” said J M Garg, chairman and managing director of Corporation Bank.

A pay structure based on performance and profitability may act as a deterrent against employee attrition. “If the pay structure is followed as per individual bank’s performance, then the banks with good performance will become more competitive as they will be able to attract and retain talent,” said M D Mallya, chairman and managing director of Bank of Baroda.

Large banks may lead the race in rewarding their employees.

“Initially this may be done independently by banks like SBI,” said K Unnikrishnan, senior vice-president and deputy chief executive of Indian Banks’ Association (IBA).

“While working out wage revisions, each bank’s capacity to compensate should be taken into consideration,” said Narayanan Raja, deputy managing director and corporate development officer, SBI.

This move will be taken forward in the next pay scale revision.

“Decisions on wage revisions are taken after negotiations with IBA and the United Forum of Bank Unions at an interval of every five years. So any decision on this will be taken forward in 2012 when the present five years duration will end,” Raja said.

Currently the pay scales in most public sector banks are almost at the same level and they are typically below those at private sector banks.

Private sector banks pay salaries as per their performance, profitability and capacity, feels Kalyan Swarup, dean, National Institute of Bank Management, from where many banks recruit entry level executives every year.

“Public sector banks like Bank of Baroda, Oriental Bank of Commerce and Central Bank of India were paying salaries in the range of Rs 5-5.5 lakh per annum to our students. On the other hand, ICICI Bank picked up students with Rs 6.25 lakh per annum, HDFC Bank at Rs 6.10 lakh per annum and Development Credit Bank at Rs 6 lakh per annum,” said Swarup.

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