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

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Regulating Managerial Pay in Banking

I am quite convinced with the article "Regulating Managerial Pay in Banking" by T T Ram Mohan (EPW, 13 September 2014). It is a comprehensive discussion on managerial pay in the Indian banking sector and makes good suggestions on solving the issue of disparity in managerial pay in Indian private and public sector banks. I consider here the concluding remarks to curb variable pay components of managerial salaries as in the European Union (EU).

I take from the debate on choosing one solution of the two, i e, by hiking public sector pay scales, or by curbing private sector pay. I feel the answer of this question lies somewhere between the given solutions. The regulator should prefer the EU's way of imposed caps on variable pay for private banks, and simultaneously the UK and US's way of a combination of deferred compensation and "clawback" for public sector banks in India. If you keep deferred compensation for a long term or till retirement as suggested by James Spindler, it does not have any scope to enhance the systematic risk for public sector banks. Thus, this could reduce the gap of managerial pay from both the ends in an effective manner. Such a solution could motivate public bank managers as well as prevent harsh pay cut to private banks' executives.

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