PSU banks may link pay with performance

The report also proposes the introduction of performance-linked incentives and employee stock options plans (ESOPs) for top performers of the banks. To retain talent and make public sector banks more aggressive compared with their counterparts in the private sector,the committee has proposed that banks must acknowledge 25 per cent of the top performers through such incentives. “This should be done to retain employees in critical areas and build a future leadership pipeline. Banks should introduce Performance Management Systems,” notes the report.

Performance-linked incentives and ESOPs,in particular,are usually used by private sector companies as a bait for their workforce to ensure maximum productivity. Introduction of such incentives in public sector banks is likely to help them rein in high attrition rates and also pull up productivity levels.

Further,to accelerate reforms in the corporate governance space,the committee has also recommended separate positions for chairman and managing director in a bank as opposed to one position at present. It has also suggested that PSBs should be board-driven and as a token of appreciation,large performers should be given the status of Navratna and Miniratna. As a special recommendation for the State Bank of India,the committee has proposed Maharatna status for the bank.

The committee submitted its key recommendations to the government last week. Chaired by AK Khandelwal,former CMD,Bank of Baroda,the committee constituted five other members — Dr TV Rao,Professor,IIM-Ahmedabad,Dr Deepak Pathak,Professor,IIT Mumbai and MV Nair,ex-chairman Indian Banks’ Association and HN Sinor,former executive IBA.