RBI defers Implementation of Compensation Guidelines

The Reserve Bank of India has deferred the implementation of the guidelines on compensation for whole time directors/chief executive officers/risk takers and control function staff of private sector banks and foreign banks operating in India to 2012-13. This was done to give banks sufficient time to formulate their policies. The guidelines were slated for implementation for 2011-2012. The Reserve Bank has advised banks to refer, in the meantime, to the Basel Committee on Banking Supervision (BCBS) consultative document on Methodologies for Risk and Performance Alignment of Remuneration and start preparatory work. The document was issued in October 2010. The Reserve Bank has also stated that it would issue the final guidelines on compensation after the publication of the final paper by the BCBS.

It may be recalled that the Reserve Bank had, in July 2010, placed on its website draft guidelines on compensation for whole time directors/chief executive officers/risk takers and control function staff of private sector banks and foreign banks operating in India. A large number of comments/suggestions have been received on draft guidelines. These are being examined. Meanwhile, the Basel Committee on Banking Supervision (BCBS), in October 2010, brought out a consultative paper titled ‘Range of Methodologies for Risk and Performance Alignment of Remuneration’ for public comments.

Ajit Prasad
Assistant General Manager

Press Release : 2010-2011/1220