ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Regulating Managerial Pay in Banking

Managerial pay disparity between private sector and public sector banking in India is widening. Should the regulators address this by hiking public sector pay scales, or by curbing private sector pay? Drawing from international policy responses, the best way for India appears to be to curb variable pay components of managerial salaries as in the European Union.

Some seven years after the financial crisis, outrage over managerial pay in banking continues to simmer and at times boil over. Bank ­failures plunged the global economy into a downturn from which it is yet to recover. And yet this seems to have hardly made a dent in the pay packets of bank managers, even at banks that were bailed out through taxpayers’ money.

Regulators believe some correctives are necessary. They are looking for ways to regulate the design of pay, if not the size of it. This is not just to appease the public at large. They are convinced, as many academics are, that the design of managerial pay was a factor underlying the crisis. What is the case for regulating pay in banking? What approaches have emer­ged? And where do we, in India, stand?

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