This document summarizes recent trends in compensation and reward management in India's public banking sector. It discusses that while public sector banks offer greater job security, salaries tend to be lower than private banks. To address concerns over lower salaries leading to attrition, the government is planning to introduce performance-linked incentives for employees. This would allow banks to earmark over 1% of net profits for incentives if targets for areas like loan growth and reducing non-performing assets are met. Other trends discussed include proposed increases to retirement age and the variable pay component of employee packages.

1. PRESENTATION ONRECENT TRENDS IN COMPENSATION AND REWARD MANAGEMENT INPUBLIC BANKING SECTOR PRESENTED BY : NIKITA JAIN C-15 NIHARIKA PAHWA C- 58 NANCY SOOD C-

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3. INTRODUCTION A public bank is that in which there are numerous partners or shareholders, and they elect from their own body a certain number, who are entrusted with its management. India’s 27 PSBs have a combined manpower strength of 7 lakh. The industry accounts for 70% of the banking business in the country PSB’s follow an industry wide wage settlement brokered every five-year by the , the industry body of India’s banks.

4. PUBLIC Vs. PRIVATE BANKS Public sector banks the pay scale is fixed for different scales & salary would increase as you get promoted to higher scale. Private banks look for qualifications, experience & knowledge of the candidate before fixing salary. So it could be on the higher side & moreover they prefer MBA grads. JOB SECURITY= PUBLIC BANKS PAY PACKAGE= PRIVATE BANKS

5. STATE OF PUBLIC SECTOR BANKS Experiencing a shortage of talent in high-end areas like risk management and treasury operations. Salaries offered by the public sector banks are lesser than that of the private sector banks, hikes in the salary can be quite less. Opportunities for growth in the career depends on the basis of seniority level, cannot expect a promotion if one does not have the right seniority level. September 26, 2010: Reserve Bank of India Governor D. Subbarao “That the emoluments of State Bank of India Chairman are just a fraction of that earned by heads of largest private banks .” The finance ministry has set up a committee to suggest a formula for revision in compensation of employees of public sector bank after the central bank has raised concern that low salaries could lead to attrition

6. REASONS FOR THIS STATE The range between the emoluments of those at the bottom of the hierarchy and CEOs cannot be large. Irrespective of their performance, all public sector bank chiefs and EDs get the same amount as bonus. Second, the top executives' pay scales are conditioned by what the government pays its own employees. The current salary structure is not attractive enough to stem attrition. Private banks, including foreign banks, have no such restriction.

7. CORRECTIVE MEASURES TAKEN Government planning to announce a performance-linked incentive which will be over and above what bank employees get at present. Banks will be able to earmark over 1% of their net profit for payment of incentives. At present, public sector banks can pay up to 1% of their net profit as incentive to employees. The government is also going to increase the ceiling on welfare schemes. There are Certain targets such as loan and deposit growth and target for non-performing assets. If the targets are met, then the incentive will be paid.

8. performance-linked incentive Any department, to qualify for financial incentives, will have to get a performance rating of 70 per cent or more on its Results-Framework Document (RFD) Employees of 62 central government departments could start earning a performance-based incentive It offers a secretary-level officer an incentive up to 40% of the basic salary, provided his department has met 100% RFD targets. A scorecard of 70% and less in meeting RFD targets would however attract zero incentive. However, no penalty will be imposed on the non-performing officers. Formula to calculate the incentive for a secretary as well as the officials lower down. For a secretary-level officer, the incentive is proposed to be 15% of cost savings (budgeted expenditure - actual expenditure) by the department multiplied by its composite score less 70, divided by 30.

9. TRENDS IN COMPENSATION & REWARD IN PSBs (27 February 2011) A government committee has recommended 15-20% variable component in employees salary package, along with the removal of the existing upper limit for their remuneration. It has also pitched for a hike in retirement age to 62 years from the current 60. Each public sector banks be allowed to settle salaries for its employees in line with their specific skill sets and the bank’s overall performance. Being an employee of a public sector bank, one can avail loans at lower interest rates and they can also get a higher percentage of interest for deposits.

10. OTHER TRENDS Dearness Allowance (DA) House Rent Allowance (HRA) City Compensatory Allowance (CCA) Conveyance Allowance Gratuity: To be eligible under SBT (Employees) Gratuity Regulations 1972, minimum service required is 10 years. Pension LFC Medical Aid and Hospitalization expenses reimbursement facility Staff Welfare & Holiday Home Facility Loan with negligible or no interest for employees Petrol allowance Newspaper bill reimbursement All India holiday for employee and dependent once in every 2 years sponsored by bank. 49.95 % D.A. for bank staffs and officers - 2011 Feb Mar Apr

11. SOME EXAMPLES

12. COMPENSATION TRENDS AT CANARA BANK It is decided to restrict the number of claims to one claim per employee (either for self or for one child) by retaining the existing ceilings under reimbursement of educational expenses scheme.

13. CANARA BANK Conti… .

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15. Punjab National Bank The Corporation is making all efforts to promote Hindi in the official work. Incentives are being provided to the employees to make use of Hindi in official correspondence. FOR THIS Hindi workshops are regularly organised. Hindi Cell has been set up at the Corporate Office. The library has good stock of Hindi books as more than 50% expenditure had been made on purchase of Hindi books as per allocation of budget for purchase of books in library.

16. State Bank of Travancore PROMOTION OF CANTEEN FACILITIES PROVISION OF LIBRARIES AND READING ROOMS ENCOURAGEMENT OF INDOOR/ OUTDOOR SPORTS AND GAMES PROMOTION OF CULTURAL ACTIVITIES FUNERAL EXPENSES: Assistance of Rs.10,000/- to the next of kin of deceased employee/ retired employee for funeral expense.

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