Private companies or Multinational companies announce bonus or incentives every year , most of them do not allow late sitting, they do not like flattery and bribery etc .They try to keep their staff happy and devoted to work. They pay for Leave and LTC in form of salary. They pay HRA and many other benefits as non -taxable and non-visible part of salary. They give cash cards or Free Food coupons. they have canteen for staff where delicious food is served at cheap rate just as Members of Parliament get cheap but delicious food in Parliament Canteen.
Executives in Private companies like work and only work , they never encourage flattery and bribery. They never like that their juniors should extend red carpet welcome to them when they visit their location. They like those staff whose contribution is maximum in enhancement of business of the company whereas executives in public sector companies like those who take personal care of bosses.
Will Indian bankers and Indian government like to follow this culture?
Work in non banking companies may be assessable and quantifiable in rupees. In banks it is not possible to quantify the work load of any staff. An officer may get 10 crore of deposit from a government department by bribing key officers there whereas another officer who is dry honest cannot afford bribe government officer to mobilize deposit .
A branch manager may be posted at a rural remote area and in a urban or metro area cannot give same output.
A branch head with adequate staff in branch can give better result than a branch head with shortage of staff.
An officer can do better in an area where customers are cordial and cooperative whereas an officer cannot perform well where area people are very much militant and the area is naxal inflicted.
A location of branch is more important, one location may have better potential for business than many others.
Quality of staff is more important. If skilled and matured staffs are supporting a branch head, he may perform better whereas if a staff is militant or unskilled or unwilled or untrained, output may be below standard
A branch where court cases, frauds cases, litigation, bad borrowers are more, growth in business may not be satisfactory.
Staff working in audit, KYC, risk rating, monitoring, Recovery staff , NPA management , Law, Credit processing, planning, guard , security personnel, account opening, counter work, peons, sweepers etc will seldom get incentives whereas a few branch head who could luckily or by their little effort get good deposit may get higher incentive. An area where big corporate, big trade houses, and big industries are available , scope of credit growth and rise in non-interest income may be more but not elsewhere .
If Regional head is corrupt, he will never give incentive to those who do not flatter and who do not earn bribe to share with boss. He has power to transfer the services of a staff to any good or bad place as per his whims. He may transfer a person to a critical place before he or she is selected for incentive.
If a Regional Head like an officer and want to give him the benefit of variable pay , he will provide him two or three extra cream staff to enable him to cross the benchmark set for variable pay or incentive. On the other if the Regional Head ( RH ) does not like an officer who is performing the best and who is likely to be entitled for incentive and variable pay , he will simply withdraw best staff from his branch.
There are many such cases where marketing officers working under a RH fails to achieve his target and hence found not eligible for any incentive but the sum total of total business mobilized by the same team of marketing officers in selling insurance policies enables a RH to cross his target and he becomes eligible for incentive sitting in his AC office.
Similarly if a Branch Head (BH) sanctions a loan of ten crore to a few bad companies to achieve targeted credit growth , he along with his RH may get additional package of variable pay, incentives and bonus. But when the same loan goes bad and becomes irrecoverable, the clever team of top ranked officers will blame natural calamities , or global recession , or higher interest rate or unfavourable market condition etc to establish that he was right in lending decision but GOD was not supportive.
Most of top executives in banks think for the betterment of their families, their kith and kin, their friends and relatives. They lend money to those corporate houses who give them precious gifts and huge amount of cash as bribe. These officer think for their self interest whereas bosses in private companies think for the profit of the company only. Bad staff in private companies may be kicked out without loss of time whereas in public sector companies like banks only weak staff is punished and powerful are never punished.
None of work in bank is quantifiable and hence any incentive based on performance in banks will further damage work culture and further add fuel to fire . Copying of Cost to Company culture to retain bank staff and to attract talented youth in banking fraternity is not at all practically feasible and viable. It will create more IR problems and more disruption in banking activities. Private banks have already burnt their fingers in the cases of recent sting operation carried out by Cobra post. Axis Bank HDFC and ICICI bank exposed in money laundering case only due to incentive scheme in all insurance related businesses.
As such plan of imposing CTC and incentive schemes or variable pay in bank is Utopian plan and it is enough to say that government is trying to divide banking fraternity , weaken the militant power of unions and finally delay the wage revision as much as possible . Their conspiracy is clear : not to allow banks to accede to wage revision more than 10 percent .so that net take pay will not be more than 2 to 3 percent more than their present net take home pay.
Not only this , the scheme of variable pay and that of incentives will lead to more corruption and cause much risk to assets created by bank officials and ultimately it will prove to be burden on depositors, taxpayers and investors in bank shares. It will promote money laundering and protect black money hoarders and prove to be a boon for bad officers only. Good performers whose work is not visible and whose contribution cannot be measured will suffer the most.
I am unable to understand why those clever ministers and clever top executives of banks who are part of Committee to look into wage revision for bank staff and who are advocating C2C concept and incentive scheme in banks do not suggest the same to employees working in state government and central government departments and other public sector undertakings like BSNL, Airlines, Railways etc.
Why not the salary and allowances of ministers, MPs and MLAs should also be linked to amount of work they do for their constituencies ?
Why these public representatives should not be taken to task for not attending their work and not attending Parliament and State Assemblies?
Why all social welfare schemes are not implemented by state government offices like Block and circle offices?
All types of payment are made through banks only because they say that banks can only ensure ensure timely and full payment to beneficiaries. Ministers also know that there is large scale corruption in Block and District level administrative offices. They know and understand it well that employees working in the office of BDO, CO , DM or SDO are not accountable for nay lapse and any deficiencies in performance. Government of India cannot monitor their staff and cannot stop corruption there but they are bent upon making all bank employees the best performer without hike in their wages.
They know that they cannot punish a corrupt staff without affecting their vote bank. As such they always try to give maximum hike in the pay of central and state government employees and try always to crush bank staff only.
In banks too, most of officers are given more than 90 marks out of 100 and hence all are outstanding as per APAR , But during promotion process many of these so called excellent officers are rejected by Interview panel and those who got 60 to 70 marks are selected. When all or majority of officers get more than 90 marks , the members of interview panel become more powerful to make or mar the career of an officer
It is worthwhile to mention here that maximum loss caused to government banks either due to fraud or due to rise in bad assets is contributed by so called star performers. When bosses are corrupt they like corrupt only and hence they give maximum marks to those officers only who help them in becoming wealthier and powerful by hook or by crook Following is the classic example of how the star performers looted the bank and cause loss to public , tax payers and investors.
If APAR of banks is also put under scanner I think majority of bank officers who are now top executives or who have retired from bank as top executives will go behind bar.I have been advocating CBI investigation into all APAR,Promotion processes and transfers which took place during last ten years to expose the fraudulent game going on in banks in the name of Human Resource Development.
When the entire system of assessment is defective, faulty and biased , how Government and bank management can imagine of getting success in imposing Variable pay scheme or performance linked pay or incentive scheme .
To read more please click on following link
http://dkjain4970901092007.blogspot.in/2012/06/average-pay-per-employee-in-private-and.html
To understand the concept of CTC please click on following link
http://importantbankingnews.blogspot.in/2013/04/chit-fund-scam.html
RBI for lower commission to curb KYC abuse like money laundering
NEW DELHI: The Reserve Bank may push private sector lenders to rationalise the commission they pay to wealth and relationship managers, as it tries to check dubious transactions and flouting of know-your-customer norms.
An online portal had alleged last month that some banks were involved in money laundering and were not complying with know-your-customer (KYC) norms. According to an RBI official, a probe by the central bank has indicated that the policy of some banks to reward employees with high commissions leads to staff overlooking KYC norms.
"It has been observed that various incentive schemes and commission structures were the foremost reasons for lower- and mid-level bank staff disregarding KYC Norms," the official, who did not wish to be named, said, adding that the RBI may ask private sector banks to rationalise the commission they pay to wealth and relationship managers.
In 2012, the central bank had issued guidelines that restricted bank staff's variable pay to 70% of fixed pay in a year. Further, private and foreign banks were directed to obtain prior approval from the RBI for remuneration of CEOs and full-time directors.
"In this case, there cannot be an overarching guideline from RBI. The banks themselves have to put caps over such commissions and ensure that all such incentivised employees have met all regulatory norms," the official said.
The issue may soon be taken up with other banks, the official added.
The central bank had initiated a probe after online portal Cobra Post alleged that the country's three largest private banks-ICICI Bank, HDFC Bank and Axis Bank-were indulging in money laundering. The three banks have denied the allegations, saying none of the conversations led to any transaction.
Private banks offer incentives to relationship and wealth managers mostly in the form of commissions and foreign travel. Banks also set steep targets for their staff to get business through insurance and other high-commission paying financial instruments.
"These structures need to be defined or more cautiously regulated," the official said.Financial services secretary Rajiv Takru had said last week that the RBI audit report had found certain "aberrations" in its probe into allegations of money laundering, but no risk of systemic failure was discovered.
"There is no risk of systemic failure. There are certain aberrations that we have discovered in the audit report. These would be addressed," Takru had said, adding that the RBI will take whatever action needs to be taken.
RBI deputy governor HR Khan had said that the central bank would initiate action against the erring banks. "Scrutiny has been done. Action is being taken both in respect of systemic level and at the individual banks," he had said.
But private sector banks say it will be imprudent to cap commissions. "Incentives are a part of all employment. Just because some may have not conformed to the norms does not mean all employees are violating them," said a senior executive with a private sector bank.
An online portal had alleged last month that some banks were involved in money laundering and were not complying with know-your-customer (KYC) norms. According to an RBI official, a probe by the central bank has indicated that the policy of some banks to reward employees with high commissions leads to staff overlooking KYC norms.
"It has been observed that various incentive schemes and commission structures were the foremost reasons for lower- and mid-level bank staff disregarding KYC Norms," the official, who did not wish to be named, said, adding that the RBI may ask private sector banks to rationalise the commission they pay to wealth and relationship managers.
In 2012, the central bank had issued guidelines that restricted bank staff's variable pay to 70% of fixed pay in a year. Further, private and foreign banks were directed to obtain prior approval from the RBI for remuneration of CEOs and full-time directors.
"In this case, there cannot be an overarching guideline from RBI. The banks themselves have to put caps over such commissions and ensure that all such incentivised employees have met all regulatory norms," the official said.
The issue may soon be taken up with other banks, the official added.
The central bank had initiated a probe after online portal Cobra Post alleged that the country's three largest private banks-ICICI Bank, HDFC Bank and Axis Bank-were indulging in money laundering. The three banks have denied the allegations, saying none of the conversations led to any transaction.
Private banks offer incentives to relationship and wealth managers mostly in the form of commissions and foreign travel. Banks also set steep targets for their staff to get business through insurance and other high-commission paying financial instruments.
"These structures need to be defined or more cautiously regulated," the official said.Financial services secretary Rajiv Takru had said last week that the RBI audit report had found certain "aberrations" in its probe into allegations of money laundering, but no risk of systemic failure was discovered.
"There is no risk of systemic failure. There are certain aberrations that we have discovered in the audit report. These would be addressed," Takru had said, adding that the RBI will take whatever action needs to be taken.
RBI deputy governor HR Khan had said that the central bank would initiate action against the erring banks. "Scrutiny has been done. Action is being taken both in respect of systemic level and at the individual banks," he had said.
But private sector banks say it will be imprudent to cap commissions. "Incentives are a part of all employment. Just because some may have not conformed to the norms does not mean all employees are violating them," said a senior executive with a private sector bank.
http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rbi-for-lower-commission-to-curb-kyc-abuse-like-money-laundering/articleshow/19687016.cms
Govt mulls linking bank staff wages to performance-Hindustan Times 25th April 2013
State-owned banks, which employ over 800,000 people, could move towards performance-based pay soon, a move that would put them on the same platform as their private sector peers, while helping keep costs under check.
A committee headed by Anil Khandelwal ,former Chairman and managing director of Bank of Baroda, which had looked into outdated human resource practices at public sector banks, had proposed that salaries be linked to performance. The committee submitted its report two years ago.
Govt mulls linking bank staff wages to performance-Hindustan Times 25th April 2013
State-owned banks, which employ over 800,000 people, could move towards performance-based pay soon, a move that would put them on the same platform as their private sector peers, while helping keep costs under check.
A committee headed by Anil Khandelwal ,former Chairman and managing director of Bank of Baroda, which had looked into outdated human resource practices at public sector banks, had proposed that salaries be linked to performance. The committee submitted its report two years ago.
This suggestion could now become part of the new wage structure. Talks have already started between banking unions and IBA on wage revision. In 2009, when the last pay revision was announced, public sector bank employees got a 17.5% hike, with retrospective effect from November 1, 2007.
While Indian Banks' Association is in favour of bringing uniform compensation culture among private and public sector banks, banking unions are opposed to moving to a performance-based pay structure.
About 30% of the staff in government banks would retire by this year. "Talent crunch is a major factor and until we look into the HR policies, it would be difficult for us to attract talent, especially in this competitive environment," a senior executive at large public sector bank, who did not wish to be identified, told Hindustan Times.
The attrition rate in state-owned banks has also increased significantly in the last few years, with a large number of banks coming up in the private sector space and offering substantially more attractive pay packages.
The Khandelwal Committee report noted that there was an acute shortage of talent in PSU banks, and fresh graduates were reluctant to join a government bank as they failed to provide concrete career growth path to their employees.
The report also underlined that instead of the present industry-level arrangement, wage decisions should percolate to the bank level.
At present, there are 26 public sector banks in India.
Banks may pitch for ‘cost-to-company’ wage concept during talks with unions
MUMBAI, APRIL 18:
The collective bargaining exercise for wage hike in public sector and old generation private sector banks could take an interesting turn.
Bank managements are likely to broach the sensitive ‘cost-to-company’ compensation concept with the 11 trade unions in the banking sector during negotiations.
The trade unions represent the interests of close to 10 lakh employees and officers in public sector and old generation private sector banks.
Public sector bank honchos have a buy-in from the Finance Ministry on pitching the CTC (cost-to-company) concept to the trade unions, said a top bank official clued in to the wage negotiations.
A management consulting firm is believed to have been given the mandate by the Indian Banks’ Association, the self-regulatory organisation of all banks in the country, for working out the modalities of the CTC concept.
UNIONS APPREHENSIVE
Trade union representatives feel that the CTC concept is a piece of financial engineering whereby the compensation appears attractive on paper but when it comes to in-hand salary, it could be as much as 30-40 per cent less that what is promised.
They fear that employees may actually be worse off as bank managements could push variable pay through the backdoor, thereby undermining the cardinal principle of labour rights – equal pay for equal work.
According to S. Nagarajan, General Secretary, All India Bank Officers’ Association, bank managements will bring up financial constraints being faced by them due to implementation of Basel-III regulations, which require banks to hold more and higher quality capital for making loans; and provisioning for bad loans and pension during the wage revision talks. Given the pressure on raising capital and provisioning, Nagarajan said bank managements will try to minimise the outgo on account of wages in the garb of transforming human resource processes and implementing new age concepts like CTC.
The Indian Banks’ Association has constituted a wage negotiating committee under the leadership of T.M. Bhasin, Chairman and Managing Director, Indian Bank, to negotiate with the trade unions on wage settlement. The first round of talks was held on February 22 and the next round is scheduled on April 22.
The ninth bipartite five-year wage accord in the banking sector expired on October 31, 2012.
While going through the reports on 10th BPS meet held at Mumbai on 22nd April 2013, between UFBU and IBA it can be seen that there may have a change in concept of compensation package of Bank Employees in forthcoming wage negotiations in tune with MOF's directions.
Hitherto bank employees wages were arrived during bipartite settlements on the basis of percentage of cost of establishment expenses of past year( Now it may be 31st March 2012 ).Where as this time ,there may be a change in concept to Cost -to- Company (CTC)basis as per IBA.
Let us look at what is the concept of CTC?
In nutshell, the amount that employee cost to company is called CTC. Entire amount spent by company directly or indirectly will be included and shown under CTC. At present Basic Pay, DA and other allowances are included under salary and after deductions one will get his take home pay. But under CTC all other components such as Medical allowance, Leave Travel Allowance or Concession (LTA / LTC),Vehicle Allowance, Telephone / Mobile Phone Allowance,Special Allowance, reimbursements to medical bills, news papers etc are also become part of ones salary.By including all these components in salary in fact the compensation in paper seems to be high whereas monthly in-hand salary may be less. Most of the Private and IT companies are following CTC concept where money given to employee as well as spent on employee is shown together.
In nutshell, the amount that employee cost to company is called CTC. Entire amount spent by company directly or indirectly will be included and shown under CTC. At present Basic Pay, DA and other allowances are included under salary and after deductions one will get his take home pay. But under CTC all other components such as Medical allowance, Leave Travel Allowance or Concession (LTA / LTC),Vehicle Allowance, Telephone / Mobile Phone Allowance,Special Allowance, reimbursements to medical bills, news papers etc are also become part of ones salary.By including all these components in salary in fact the compensation in paper seems to be high whereas monthly in-hand salary may be less. Most of the Private and IT companies are following CTC concept where money given to employee as well as spent on employee is shown together.
General Secretary of AIBOA has stated that bank managements will bring up financial constraints being faced by them due to implementation of Basel-III regulations, which require banks to hold more and higher quality capital for making loans; and provisioning for bad loans and pension during the wage revision talks. Given the pressure on raising capital and provisioning, bank managements will try to minimise the outgo on account of wages in the garb of transforming human resource processes and implementing new age concepts like CTC.
Trade unions, already expressed their fear that employees may actually be worse off as bank managements could push variable pay through the backdoor, thereby undermining the cardinal principle of labour rights – equal pay for equal work.
As per reports, it is also learnt that a management consulting firm is believed to have been given the mandate by the Indian Banks’ Association, the self-regulatory organisation of all banks in the country, for working out the modalities of the CTC concept.
IBAs new proposal will have impact on resolving issues of Pensioners also, for which we have to wait for further discussions taking place in coming days.
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Mr. L S Raman Submit his opinion as under
The real colour of IBA as a negotiating organisation is visible.
It is nearly five months after the due date for revision of salaries and allowances, and now IBA is in the process of presentation of basics. This is a clear case of delaying tactics by presenting extraneous matters before the negotiating table
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Since the Officers and employees as a team have performed in generating this level of profit they deserve substantial pay hike as an incentive.
Commented by Mr. L. S. Raman
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