The Ministry of Finance (MoF) has launched a revised Performance-Linked Incentive (PLI) scheme with an aim to reward and motivate employees for significant value creation for various stakeholders.
- The previous PLI scheme was restricted only to Whole-Time Directors (WTDs) – Managing Director (MD) & Chief Executive Officers (CEOs) and Executive Directors.
- The revised scheme also applies to senior executives in the rank of Chief Manager and above.
- This revision will reduce the existing wide compensation disparity between senior executives of Public Sector Banks (PSBs) and private sector banks (PvSBs).
Note: For the same level of job responsibility and rank, a senior executive of a PSB currently earns multiple times the remuneration of a PSB executive.
Key Points
i.The PLI ceiling for MD & CEO and Executive Directors of nationalised banks and Chairman and Managing Directors (CMD) and Deputy Managing Directors (DMD) of State Bank of India (SBI) has been fixed at 100 % of their annual basic pay.
ii.On the other hand, the PLI ceiling for senior executives in the rank of Chief General Manager (CGM) and General Manager (GM); and Deputy General Manager (DGM) and Assistant General Manager (AGM) has been fixed at 90% and 80%, respectively, of their annual basic pay.
- For Chief Manger, this ceiling has been set at 70%.
iii.All permanent employees, including lateral hires and officers on deputation, in the rank of Chief Manager and above will now be able to avail PLI and it will be paid in cash in a single tranche.
Eligibility:
i.In order to be eligible to operate the PLI Scheme, every bank has to meet at least three out of four criteria, including positive return on assets (RoA) and net non-performing asset (NPA) at not more than 1.5%, or in case if Net NPA is more than 1.5%, then reduction of 25 basis points or more in opening net NPA of the financial year.
ii.The other criteria include: cost to income ratio (CIR) should not be more than 50% or in case if it is more then there should be at least a year-on-year improvement in CIR; and capital to risk-weighted assets (CRAR) ratio as per the minimum regulatory requirement plus 200 basis points or more.
iii.4 equally-weighted parameters have been formulated to evaluate Banks’ performance – efficiency, business, asset quality and Financial Inclusion (including Enhanced Access and Service Excellence reforms).
iv.As per the scheme, approval of PLI payment will be done by the government for WTDs; and the board of the bank for senior executives.
Committee for implementing PLI
i.A committee is headed by the M. Nagaraju, Secretary of Department of Financial Services (DFS), MoF.
The committee includes Additional Secretary (DFS), Joint Secretary (Baking) and Chief Executive of Indian Banks’ Association (IBA) as its members, will analyze and evaluate the governance mechanism in PSBs for the PLI.
ii.The committee will provide a list of the banks eligible to be considered under the PLI Scheme and also officers ineligible for the PLI scheme.
About Ministry of Finance:
Union Minister– Nirmala Sitharaman (Rajya Sabha- Karnataka)
Minister of State – Pankaj Chaudhary (Constituency- Maharajganj, Uttar Pradesh)
