While this is a first-of-its-kind move among PSBs, many private banks have already introduced a variable component in their salary structure
According to a report by Business Standard, this is the first time that any PSB will introduce such an incentive structure for its senior management, although an approval from the government shall be required for it.
"The bank is seriously thinking of introducing a system of performance-based incentives for officers above the general manager grade. There will be a component of fixed and variable pay. But it will evolve slowly," PNB Managing Director and Chief Executive Officer, Sunil Mehta told the news daily.
BoB and SBI may follow suit as both PSBs are eyeing a revised compensation framework, reports suggest.
While this is a first-of-its-kind move among PSBs, many private banks have already introduced a variable component in their salary structure.
Members of the staff are offered variable pay in either cash or stock-linked instruments along with employee stock option plans, on the basis of the performance of both individual and the bank.
As of now, the salary structure of all employees of PSBs is decided through bipartite settlements between the bank's management, United Forum of Bank Unions (UFBU) and Indian Banks' Association (IBA).
The proposed revised salary structure for senior employees comes in the aftermath of opposition from bank unions against six PSBs -- PNB, SBI, BoB, United Bank of India, Indian Bank and Oriental Bank of Commerce -- for restricting the latest wage negotiations up to scale-III officers or up to the senior manager level.
The bank unions are reportedly not in favour of the performance-linked salary structure."The demand of the trade unions has been one rank, one pay. We are not in the corporate sector, where people are hired for performing a particular job. It will be difficult to evaluate performance in all positions in PSBs," joint general secretary, All India Bank Officers' Confederation, Ravinder Gupta, was quoted as saying.