Bank employees may get performance related incentive

    Nearly nine lakh public sector bank employees could soon be rewarded for helping their employer improve its performance. 

   The government is planning to announce a performance-linked incentive which will be over and above what bank employees get at present. Some bank chairmen and executive directors would also be better off with the government deciding to reward the good performers. At present, irrespective of their performance, all public sector bank chiefs and EDs get the same amount as bonus. 

   Now, sources said, the idea is to grade the banks into three categories—State Bank of India, large public sector banks and smaller players —for the reward scheme for employees as well as chiefs. 

   While the idea of a performance-linked pay was first discussed at the time of the last wage negotiation, it had to be shelved due to opposition from bank unions. However, the issue was revived by an expert committee headed by A K Khandelwal, a former Bank of Baroda CMD. 

   With the unions insisting that they did not agree to variable pay, the government is of the opinion that this can be over and above the 17.5% increase that has been agreed upon, which in any case was in addition to a second pension option. So far, only IDBI Bank has a performance-linked salary plan but that is unoperational given the government’s concerns. 

Once the scheme is implemented for all banks, which is expected to be from the next financial year, 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. Apart from increasing this ceiling, the government is also going to increase the ceiling on welfare schemes. 
The scheme will entail that banks sign a Statement of Intent with the government at the start of the financial yearwhich will prescribe 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. Banks will, however, be required to put in place a performance management system before rolling out the new plan.

Reward scheme in brief.

• Nearly nine lakh employees of public sector banks will benefit from the plan 

• Idea is to grade the banks into three categories—SBI, large public sector banks and smaller players —for the reward scheme for employees as well as chiefs 

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