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Friday, September 4, 2015

After SBI proposal, all public banks may get to share profits with staff 3 TO 5% OF NET PROFIT

India's largest lender State Bank of India's proposal to share 3-5 per cent of net profit with its employees as an incentive may encourage the government to extend the initiative to all state-run banks, a move which might drive reforms and attract young talent to state-run banks. 

 
The government has sought the opinion of Indian Banks' Association (IBA), an industry body, on how to make the scheme acceptable to all public sector banks, three people familiar with the matter told ET. 
The finance ministry has asked IBA's opinion on the matter, which in turn, is checking with all its members, and is expected to give its feedback in the next few weeks, they said. 


 

The government is considering our proposed plan to share 3-5% profit with employees on an incentive basis," said Ashwini Mehra, deputy managing director and corporate development officer at SBI. "If we get the approval, it will help draw a talent pool." 

If the government, the majority stake owner in all state-owned banks, clears the plan, a group of 27 government-owned banks would share 3-5%, or Rs 1,134 to 1,891 crore profits, with lakhs of employees, going by FY15 numbers. 

 
The scheme, if implemented, will help these banks stave off competition from the private sector or foreign banks, since they pay much higher salaries. 

An assistant/deputy general manager at a public sector bank is typically in the age group of 42-52 years, but much younger people become vice-presidents at private sector banks and get much higher salaries. An AGM, or DGM, earns Rs 18-28 lakh a year at PSBs while a person can earn as high as Rs 35-45 lakh in top private/foreign banks, say .. 

 "The move, if approved, will motivate young talents to favourably look at state-owned banks as a career option," said Babu Sivaprakasam, partner (banking), Economic Laws Practice, a consultancy firm. "Today, even if PSBs manage to tap talent pool, they struggle to retain them due to an imbalanced and skewed pay structure." 

RBI governor Raghuram Rajan too has been advocating banking reforms in the public sector space. 
Wherever possible, we have to move steadily but firmly, ever expanding the scope of reforms while always limiting the uncertainty they create," he said in the central bank's 2014-15 annual report. 
 

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