These Public Sector Banks May Introduce Performance-Linked Pay

Public Sector Banks are gearing up to compete with Private Sector banks and it’s started with right track – Three Public Sector Banks i.e. State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) are planning to introduce performance-linked salary structure for the senior management. First time in the history of Public Sector Bank such type of proposal is  moving up.

PSB’s are introducing performance-based incentives for officers above the general manager grade. There will be a component of fixed and variable pay. 

Business Standard reported that the largest lender SBI and BoB may also follow a similar model and are working on a compensation framework.

Read – Latest Outcome 11th Bipartite Salary Settlement For Bankers

Proposal by PSB’s are yet to get approval from the government.

Such practices are very common in private banks. They already have a component of variable pay in the salary structure of employees based on the individual’s and bank’s performance.Employees are offered variable pay in the form of cash- or stock-linked instruments along with employee stock option plans (ESOP).

Where as in the Public Sector Banks, the pay and allowances of employees at different levels up to General Managers are normally decided through bipartite settlements between the Indian Banks’ Association (IBA), the bank’s management and trade union body United Forum of Bank Unions (UFBU). 11th Bipartite Salary settlement for bank employees are pending since Nov 2017.

Recently, six public sector banks SBI, PNB, BoB, Indian Bank, United Bank of India and Oriental Bank of Commerce have given the restricted mandate to IBA for settling 11th Bipartite wage settlement negotiations up to scale-III officers or up to the senior manager level only. 

Bank unions are agitating against such move by these six PSBs and demanding “One Rank, One Pay” and advocating that It will be difficult to evaluate performance in all positions in PSBs

However, banks are awaiting the feedback of meeting proposed to hold on 30th July between IBA and Bank’s Union. The banks will take a decision after the bipartite settlement between the bank management and worker unions take place. The IBA will take a final call on the wage settlement and then the banks will decide whether they want to adopt a common framework or do it separately.

Previously BBB i.e. the Banks Board Bureau had sent a set of recommendations to the department of financial services (DFS) in the finance ministry on a compensation system for the senior management across all PSBs to ensure consistency.  BBB had proposed that time that performance linked compensation should be made up of a fixed component and a variable component — both short and long-term. The short-term variable component may be in the form of performance-linked incentives — restricted to 50 per cent of the fixed component and the long-term component through employee stock options, as per its recommendations.