For years, the pay disparity between senior executives at public and private sector banks has been a source of contention.
According to the bank’s annual report, State Bank of India (SBI) chairman Dinesh Khara received a salary of Rs 37 lakh during fiscal year 2022-2023, an increase of nearly 7.5 percent over the previous year. SBI is India’s largest bank in terms of assets.
And, while his salary (base pay plus dearness allowance) has increased by around 7.5 percent over the previous year, it is still insufficient to compete with that of his private bank counterparts.
This was 13.4 percent more than his predecessor, Rajnish Kumar’s, pay during FY21.
While the FY23 figures aren’t yet available, Khara drew almost 18 times less than Jagdishan last year. When compared to the SBI Chief and other PSB heads, the salaries of other private bank CEOs are likewise fairly high.
Khara joined SBI as a probationary officer in 1984 and will take over as chairman in October 2020. Prior to that, he was the bank’s managing director, where he was in charge of worldwide banking and SBI subsidiaries, among other things.
Is the remuneration of the PSB Chief too low?
This is, in reality, an old argument. In 2020, an unintentional joke by the then-SBI chairman, Rajnish Kumar, sparked a debate in India’s banking circles about the low pay packages of government-run bank officers in comparison to their private-sector colleagues.
And, as is typical with such statements, Kumar’s remarks sparked a new round of debate on the subject. Many in the financial business were offended by the remarks.
How does Khara’s pay compare to that of other bank CEOs?
In comparison, Amitabh Chaudhry, MD and CEO of Axis Bank, was the highest-paid private bank leader in India in the previous fiscal year, earning a total annual pay of Rs 7.62 crore, according to the bank’s FY22 annual report.
Following Chaudhry was Sumant Kathpalia, the CEO of IndusInd Bank, who received more than Rs 7.31 crore in yearly compensation in FY22. According to the bank’s annual report, Sandeep Bakhshi, the MD of ICICI Bank, received Rs 7.05 crore in yearly compensation past fiscal year.
Sashidhar Jagdishan, MD and CEO of HDFC Bank, was paid Rs 6.51 crore in the previous fiscal year, whereas C.S. Ghosh, MD of Bandhan Bank, was paid Rs 4.35 crore in FY22.
Is the industry in agreement?
Former SBI chairman stated Kumar’s remark was in poor taste and lowered the dignity of his office. The individual declined to be identified. Others agreed with Kumar, noting that he has a valid point about the lower pay levels in PSBs.
- The SBI Chairman pay must be viewed in conjunction with the benefits received. Here are a few examples: a plush apartment in Mumbai, devoted assistance, two cars with drivers, unlimited petrol and so on. Even still, overall compensation (including perks) will be significantly lower than that of private sector bank peers.
- The issue is that a lack of a level playing field may produce a lack of incentive for experts to stay with state-run banks for prolonged periods of time. While the salary discrepancy is significant, PSUs, particularly banks, are expected to compete aggressively with private sector rivals.
- PSBs, according to JN Gupta, founder of SES, a proxy advisory service, and former executive director at the Securities and Exchange Board of India (SEBI), need a level playing field to compete with private banks.
Former RBI governor Raghuram Rajan raised the matter in August 2016 when he stated that top-level pay in the public sector, including the RBI, fall far short of global standards. “Of course, one of the issues is that the public sector overpays at the bottom but underpays at the top. “I also feel underpaid,” Rajan stated.
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