Reserve Bank of India has issued the revised guidelines for the salary given to the Bank executives and whole-time directors at the private banks to reduce the risks which disturb the financial structure of the organisations and to keep the governance in check.
Private sector banks, foreign banks operating under the wholly-owned subsidiary mode, and foreign banks operating in India under the branch mode are now required to obtain the regulatory approval for providing remuneration, the Reserve Bank said in a circular.
The RBI said that the approval process would be depended on the compliances which banks are fulfiling. Also, whether the banks are following the guidelines provided by the Basel Committee on Banking Supervision (BCBS).
“The principles are intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes. The principles call for effective governance of compensation, alignment of compensation with prudent risk taking, effective supervisory oversight and stakeholder engagement,” it said.