Friday, August 8, 2014

Salary Bribe And Corruption

This refers views of RBI governor on salary hike for Chiefs of Public Sector Banks and making board stronger (news items given below)

Now after the exposure of CMD of syndicate bank taking bribe from borrowers in sanction of credit facility, RBI Governor talks about making Bank’s boards stronger. I am unable to understand how a bank’s board which enjoys absolute power may be weak. Directors of  board in each bank are enjoying almost equal power, unparallel power and undisputed power. Board of directors enjoys huge power and they can independently sanction hundreds of crores of rupees to any individual or any company for any project with our without any security , prime or collateral. They can spend crores of rupees in travel, advertisement, in buying goods and services, in appointment and promotions and what not.

As a matter of fact, Performance of various boards depend on quality of individuals who are appointed as Director and who is made CMD of the bank. If the individual in any board is corrupt, he or she can do any damage to the organization. If CMD is corrupt the damage may be more harmful and voluminous. If top officials are corrupt like Syndicate bank CMD, one cannot dream of merit based promotion or merit based sanction of loan. If is always the kickback or commission which plays major role in recruitment, promotion or in sanction of loans

 If the ruling party of Ministry of Finance can auction post of ED and CMD for self interest or build pressure on board members to sanction loan to any company of their choice or advice board to write off loan of any defaulter, it is not the deficiency of power or weakness of board but it is the quality of governance which matters much. If Government picks up persons from their kith and kin, from their relatives and friends and from party members for the post of Director or that of CMD without keeping in view the suitability for bank and without assessing the talent an individual possesses, the role of corruption has to exist unabated, it has to come in picture before taking any vital decision. If petro pump owner, TV anchors or loyal to ruling party are picked up for the post of bank’s Director, how can one dream of good governance from such board.

RBI governor further says that salary of chiefs of PS banks should be raised to make it similar to that of private banks. He perhaps means to say that if salary goes up, the volume of corruption will come down. Yes to some extent he may be true. But I like to say here that majority of Branch Managers, Regional Heads, Zonal heads, General Managers, DGMs etc in almost all Public sector banks are indulged in bribery and flattery. 

Why not their salary is hiked adequately? 

Officers of these banks are also crying for wage hike for last two decades but GOI has not taken the issue of Bipartite Settlement seriously.

RBI Governor has not taken any interest in stopping  occurrence of delay  in signing of Bipartite Settlement between Bank Unions (UFBU) and Indian Bank association (IBA). It is important to point out there that Xth Bipartite settlement for wage hike of bank employee is due since November 2012.. None of Ministers have taken pain to know why wage settlement for bank employees has been pending for two long years.

Unemployed youth do not want to join bank’s service due to low wages and even if they join due to their extreme poverty or due to painful scarcity of availability of alternate jobs, they resign from bank as soon as they get better job. Attrition rate in banks is higher than that in all other sectors. IT companies pay salary to their employees many times of what banks pay to its employees. As such if it is justified to raise the salary of Chiefs of Banks to reduce level of corruption, it is also necessary to increase the salary junior level employees. It is to be assessed why Indian educated youth prefer doing job in foreign countries. Why is there exodus of talented youth to abroad?

However I am of the view that quantum of salary is not the key reason behind rampant corruption in banks. It is lack of governance and lack of action against erring officials which lead to rise in corruption. It is political interference in matter of corrupt officials which forces the management to exonerate the guilty officers. It is whimsical promotion and arbitrary transfers of officers which lead to bribery and flattery. It is corruption at top levels and in political domain which forces subordinate to follow the path of corruption or lead a rejected life. Human resource is ill treated in banks and still key officials of RBI and key ministers of GOI prefer keeping silence and remaining as silent spectator of ‘Draupdi Chirharan’.

I would like to submit some illustration to substantiate the fact that mere hike in salary is not going to reduce level of corruption. Three to four decades ago, salary of teachers used to be much low compared to employees of bank or that of state government or central government. Whenever people used to say that there is no teaching in government schools, teachers used to plead that their pay is too low and hence they do not attend classes. 

It was usually told in public domain that quality of education in government school may improve only their salary is suitably increased. But the bitter truth is that salary of teachers was increased in later years by two times to five times , still the quality of teaching in government run schools and colleges is poorest in the country compared to private schools and colleges. 

Corruption in educational institute is not less than any other field. It is open secret that question papers for examination and even marks are openly sold to students, degrees are sold in the market and admission in prominent schools and colleges are sold after taking lacs of rupees below the table.

Some years ago, it used to be said that salary and allowances of elected representatives like MLA and MPs is very low and due to this there is rampant corruption in political field. But during later years salary and allowances of these elected representatives have gone up sharply. Still corruption among these elected representatives called as ministers, MLAs and MPs is more than that in all other officers and employees.

Obviously I cannot agree that mere rise in salary will reduce level of corruption. Government will have to stop the culture of flattery. They will have to stop arbitrary transfers and posting. They will have to stop selling cream post. They will have to ensure time bound promotion based on seniority so that officers do not indulge in flattery to their bosses and they courageously protest evil works of bosses. They will have to stop corruption in judiciary and police department. They will have to stop interference in appointment and promotion. They will have to ensure that outside agency or officials do not put pressure on any office head for transfer or promotion of any employee. And so on…………

Last but not the least , it will not be an exaggeration to say that level of corruption is in higher proportion in higher level of officials who are paid comparatively higher pay. The more one is paid, the more his greed increases for getting more .Low paid employees reconcile to a great extent with what they get but high wage earners in banks or elsewhere are generally more corrupt and they try to accumulate more and more wealth.

Subbarao for higher salaries to chiefs, executives of PSU banks-Live Mint-07.09.2010

Mumbai: Concerned over low salary structure in PSU banks, the Reserve Bank of India (RBI) governor D Subbarao on Tuesday said that in the absence of suitable compensation package they would lose talent to private sector lenders.
“The executive compensation in the public sector, as is well known, is lower than that in the private sector...If public sector banks are required to compete with private sector banks on a level playing field, there is a good case for compensating them too on a competitive base”, Subbarao said a conference organized by IBA and Ficci.
Incidentally, Subbarao gets a meagre about Rs15 lakh a year compared to packages worth crores for CEOs of private sector banks like ICICI Bank, HDFC Bank and Yes Bank.
“There is a good reason to revise their (PSU bank executives) compensatory packages...There is also a risk that if the public sector bank compensation is not improved, the public sector may lose talent to the private sector,” Subbarao said.
Among the public sector lenders, State Bank of India chairman OP Bhatt got a total remuneration of Rs26.5 lakh during 2009-10.
In case of private sector lenders, HDFC Bank managing director Aditya Puri earned Rs3.40 crore in 2009-10 while ICICI Bank MD and CEO Chanda Kochhar’s pay package stood at Rs2.08 crore during that fiscal.
Shikha Sharma, who left ICICI Bank group to join as MD and CEO of Axis Bank, also earned Rs1.52 crore in the last fiscal. Others getting more than Rs1 crore included new generation private sector lender Yes Bank’s chief Rana Kapoor (Rs1.28 crore) and Kotak Mahindra Bank’s MD Uday Kotak (Rs1.13 crore).
Besides, according to a recent analysis of salaries paid to top officials of RBI and of banks licensed by it to do business in the country, Subbarao’s total remuneration is less than not only the chiefs of private sector banks, but also most of the public sector lenders.
The gap is huge with salaries of some of the bank chiefs being over 20-times of what is paid to RBI governor, and its four deputy governors.
While RBI governor gets an annual gross salary of little over Rs15 lakh, its deputy governors get around Rs13 lakh per annum.
In comparison, at least 14 top executives at various private sector banks got an annual remuneration of more than Rs1 crore in the last fiscal ended 31 March 2010.
Public sector banks account for nearly 70% of the country’s banking sector where compensation is determined by the government.
As regards the private and foreign banks, the compensation packages are approved by the central bank. “RBI has historically ensured that the compensation is not excessive, is consistent with industry norms, is aligned to the size of the bank’s business and that the variable pay component is limited”, Subbarao said.

Subbarao for higher salaries to chiefs, executives of PSU banks

RBI Governor earns less than 5% of top-paid bankers-Economic times 5th September 2010

NEW DELHI: In an irony of sorts, RBI gets to approve salaries of all the top-level bankers in the country, but the central bank's top officials themselves get less than 5 per cent of what is paid to the bank chiefs.
An analysis of salaries paid to top officials of Reserve Bank of India and of banks licensed by it to do business in the country shows that RBI Governor D Subbarao's total remuneration is less than not only the chiefs of private sector banks, but also most of the public sector lenders.
The gap is huge with salaries of some of the bank chiefs being over 20-times of what is paid to RBI's Governor, its four Deputy Governors or its seven Executive Directors.
According to the information available from RBI under the Right to Information Act, RBI Governor D Subbarao got a gross salary of Rs 1,28,500 in the month of June 2010. This corresponds to an annual package of little over Rs 15 lakh for RBI Governor, who is a signatory to all the currency notes in the country.
Subbarao is the top-paid executive at RBI, followed by the four Deputy Governors, Shyamala Gopinath, Usha Thorat, K C Chakrabarty and Subir Gokarn, who got a gross salary of Rs 1,11,500 each in the same month. This translates into annual pay of about Rs 13.4 lakh.
RBI's seven Executive Directors were paid Rs 90,271 each in June 2010 -- the latest month for which salary data was available -- giving an annual package of less than Rs 11 lakh.
In comparison, at least 14 top executives at various private sector banks got an annual remuneration of more than Rs one crore in the last fiscal ended March 31, 2010.
Among the public sector banks also, at least ten top executives of various banks including the State Bank of India Chairman OP Bhatt's salary is higher than that of Subbarao.
Bhatt's total remuneration in the fiscal 2009-10 stood at nearly Rs 26.5 lakh.
However, it is the private sector banks who pay the most to their top executives. The pay packages of their top executives exceed by a large margin pay packages of their public sector peers as also RBI's top officials.
HDFC Bank Managing Director Aditya Puri earned Rs 3.40 crore in 2009-10 while ICICI Bank MD and CEO Chanda Kochhar's pay package stood at Rs 2.08 crore during that fiscal.
The government fixes the remuneration for key executives of public sector banks, as also that of RBI's top officials. On the other hand, private banks need a clearance from RBI for salary of their top executives, but currently there is no cap.
RBI in July suggested slashing salaries of CEOs and directors of private banks on poor showing and limiting the annual pay hikes to 10-15 per cent. At around the same time, a panel set up by Finance Ministry had recommended better salaries for public sector bank chiefs.
Salary of RBI governor less than 5% of top bankers
By Neelima Shankar

Reserve Bank of India approves salaries of all top bankers of the country, but it has been found that the top officers of the apex bank itself get paid less than 5% of the amount paid to chiefs of banks.
An analysis done on the pay structure of RBI's top officials and those of banks which have been given license by it to operate in India has shown that the total pay received by RBI Governor, D Subbarao is lesser than the top officials of both public as well as private sector banks.

The difference in amount is a big one which is almost 20 times more for some bank chiefs, than what is paid to the RBI governor, four deputy governors or seven executive directors.

As per RTI Act, RBI Governor D Subbarao got a gross salary of Rs 1,28,500 in the month of June 2010. Subbarao is the highest paid executive at RBI, followed by the four Deputy Governors, Shyamala Gopinath, Usha Thorat, K C Chakrabarty and Subir Gokarn, whose gross salary amounted to Rs 1,11,500 each in the same month.
In contrast, as many as 14 top ex
ecutives of different private sector banks got an annual salary of more than Rs one crore in the last fiscal.

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