Govt Announces New Performance-Linked Incentives For PSU Banks' Senior Executives

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New Delhi: The central government has revised the performance-linked incentive scheme for whole-time directors and senior executives of public sector banks.

As per the Department of Financial Services under the Ministry of Finance, the objective is to offer an enhanced performance-linked incentive (PLI) scheme to suitably reward and motivate employees for significant value creation for various stakeholders, the ministry said dated November 19.

As per the rules, for any bank to be eligible to operate the PLI scheme, at least three out of the following four criteria have to be met. They include Return on Asset must be positive; net NPA at not more than 1.5 per cent or in case if net NPA is more than 1.5 per cent then a reduction of 25 basis points or more in opening net NPA of the financial year; Cost to Income Ratio at not more than 50 per cent or in case if the CIR is more than 50 per cent then at least year-on-year improvement in CIR.

Capital to Risk (Weighted) Assets Ratio must be at minimum regulatory requirements. The assessment shall be based on the performance of the bank as per its audited figures as of March 31 of the immediately preceding financial year. In terms of eligibility, it has been decided that all permanent employees, including lateral hires and officers on deputation, in scale IV and above shall be part of the incentive scheme.

But, employees punished with dismissal, removal, or termination from service shall not be eligible for PLI. Employees punished with major penalties will not be eligible for the Rigor period.

In the cases of resignation or termination, the amount of incentive not paid out will stand forfeited and lapsed. The PLI will be paid in a single tranche and the entire payment shall be in cash. The scheme will come into force retrospectively from the financial year 2023-24.