RBI proposes to rein in compensation packages of private bank CEOs

Penalty on cards if bank underreports bad debt, provisioning

The Reserve Bank of India (RBI) has proposed inserting a clause in compensation packages of private bank chief executive officers (CEO) that would allow for a penalty if the bank concerned underreports bad debt or provision beyond the central bank’s tolerance. 

“Wherever the assessed divergence in the bank’s asset classification or provisioning from the RBI norms exceeds the prescribed threshold for public disclosure, the bank shall not pay the unvested portion of the variable compensation for the assessment year… Further, in such situations, no proposal for increase in variable pay (for the assessment year) shall be entertained,” the RBI said