FinMin seeks views of IBA on variable pay in banks by Nov-end

New Delhi: The Finance Ministry has sought views of the Indian Banks’ Association (IBA) on introduction of variable pay in the public sector banks.

The Khandelwal committee on human resources (HR) had suggested introduction of variable pay in state-run banks as a major component of wages. In such an arrangement, banks to have the discretion to go in for cost to company concept.

The recommendation of the committee may be considered by IBA and its final views sent to the government before November 30, Department of Financial Services said in a letter addressed to IBA. It has been decided that IBA shall constitute a panel of 3 CMDs to examine the recommendations, it said.

Khandelwal panel had recommended that banks should consider variable pay as a major component of wages. Besides, the letter has also asked IBA’s view on the common pool creation for the post of Executive Directors (EDs) and CMDs.

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According to the committee report, headed by former Chairman and Managing Director (CMD) of Bank of Baroda A K Khandelwal, a common pool of General Managers to be created to the entire banking industry. Only identified potential candidates through assessment centre to become eligible for ED or CMD positions.

Similarly, four other issues have been referred to IBA for their views including, limiting incentive to 25 percent to those covered under performance management system (PMS) The government has accepted as many as 56 recommendations. These include reducing the minimum length of service needed in a particular scale to become eligible for promotion.

Besides, the government has also given its approval to the proposal that banks should introduce a system of succession plan for key critical and leadership positions. Each critical position should be backed up by three potential successors in the reserves.

Among other proposals, public sector banks will carry out detailed and structured manpower planning exercise every year for a time spectrum of five years, linking it with strategic and business plans. They can also seek the advice of outside experts.

PTI