Bank Unions Oppose PLI Scheme for Senior Bank Executives

AIBOC and AIBEA have written a letter to the DFS Secretary requesting him to review the recently introduced PLI Scheme for Senior Bank Executives from Scale IV. Recently the government has introduced a new PLI Scheme for officers from Scale IV till MD&CEO. The officers will be paid PLI up to 100%.

PLI Ceiling for Each Category

Grade	PLI Ceiling as % of Annual Basic Pay
EDs and MDs of Nationalised Banks, DMDs, MDs, and Chairman of SBI	100%
Scale VII and Scale VIII	90%
Scale V and Scale VI	80%
Scale IV	70%

AIBEA Urges DFS to Review Revised PLI Scheme for Senior Bank Executives

The All India Bank Employees’ Association (AIBEA) has expressed concerns over the revised Performance Linked Incentive (PLI) scheme for Whole Time Directors and senior executives in public sector banks (PSBs). In a letter addressed to the Secretary of the Department of Financial Services (DFS), AIBEA highlighted issues arising from the recent directive mandating PSBs to formulate board-approved policies under the revised scheme.

The DFS notification dated November 19, 2024, extends the PLI framework to officers from Scale IV to Scale VIII. AIBEA argues that this directive undermines the collective bargaining agreements already in place between the Indian Banks’ Association (IBA) and the United Forum of Bank Unions. These agreements cover employees from clerical staff to officers in Scale VIII and are based on mandates provided by bank boards.

AIBEA pointed out the inequity in limiting performance-linked incentives to less than 5% of the workforce, primarily senior officers, while excluding the remaining 95% of employees who contribute significantly to business growth at the field level. This selective approach, the association warned, risks fragmenting the workforce and impacting collective harmony.

Concerns Over Autonomy and Governance

Citing the Gyan Sangam summit of January 2015, where the Prime Minister emphasized professional autonomy for banks, AIBEA noted that the current directive contradicts this principle. The association asserted that the scheme imposes centralized control, undermining the autonomy of PSB boards to govern independently. It warned that such micromanagement could hinder strategic decision-making tailored to the unique challenges of individual bank

AIBEA also criticized the scheme’s reliance on the controversial “bell curve” method for performance evaluation, describing it as outdated and detrimental to employee morale. The association argued that this system fails to account for individual competencies and potential, often forcing arbitrary rankings that lead to unfair outcomes.

Risks of Reward-Driven Systems

The letter highlighted the pitfalls of reward-based compensation systems, warning that they could erode intrinsic motivation and teamwork. AIBEA argued that incentivizing individual performance at the expense of collective growth could harm organizational excellence and innovation. The association stressed that true excellence stems from intrinsic motivation rather than extrinsic rewards like monetary incentives.

Call for Collaborative Compensation Design

AIBEA urged the DFS to respect the autonomy of public sector banks and entrust the IBA and bank managements with designing compensation mechanisms in consultation with unions and associations. Such an approach, the association argued, would ensure fairness, sustainability, and alignment with the collective growth of banks and their workforce.

The AIBEA concluded by emphasizing the need for inclusive and equitable policies that recognize the contributions of all employees rather than prioritizing a select few. It called on the DFS to revisit the PLI scheme in the interest of preserving organizational harmony and ensuring the long-term success of public sector banks.