RBI to issue norms on CEO compensation by December

The Reserve Bank of India (RBI) on Tuesday said it will issue final guidelines that would provide a framework to regulate salaries of chief executive officer and other top executives in private and foreign banks.

The Reserve Bank of India (RBI) on Tuesday said it will issue final guidelines that would provide a framework to regulate salaries of chief executive officer and other top executives in private and foreign banks.

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“It is proposed to issue final guidelines on compensation practices by end-December 2010,” RBI said in its second quarterly monetary policy.

In July, the RBI had come out with draft guidelines for compensation of executives in private sector banks and foreign banks, in line with initiatives taken by the G-20 group of nations.

The guidelines cover effective governance of compensation, alignment of compensation with prudent risk-taking and disclosures for whole time directors and CEO, risk takers of banks as well as staff in the audit, compliance and risk management functions.

The Reserve Bank of India had proposed to limit annual salary increases of CEOs or wholetime directors of private banks to 10-15%, besides a provision for slashing their remuneration in case of poor financial showing, in its draft guideline.