Govt Revises Performance-Linked Incentive Scheme For Public Sector Bank Executives

A government-appointed committee will assess the eligibility of banks under the scheme based on four parameters

The government has introduced a revised Performance-Linked Incentive (PLI) scheme for senior executives of public sector banks, with parameters such as Return on Assets (RoA) and net non-performing assets (NPA) levels forming key eligibility criteria. The new scheme, effective from the financial year 2023-24, aims to reward and motivate senior bank officials for creating significant value for stakeholders, according to a circular issued by the Ministry of Finance.

Eligibility and Evaluation

A government-appointed committee will assess the eligibility of banks under the scheme based on four parameters. These include achieving a positive RoA and maintaining lower levels of net NPAs. Banks must meet at least three of the four criteria to qualify.

The committee, headed by the Secretary of the Department of Financial Services (DFS), will include the Additional Secretary (DFS), Joint Secretary (Banking), and the Chief Executive of the Indian Banks’ Association (IBA) as members.

As part of the evaluation, the panel will examine governance mechanisms in banks during the PLI evaluation period, particularly concerning serious violations, malpractices, or incidents impacting the institution's credibility and reputation.

“The committee shall, after assessment, list the banks eligible for the PLI scheme. It may also decide on the (in)eligibility of specific officers for the incentives,” the circular stated.

Incentive Structure

The revised PLI scheme allows eligible executives to receive incentives of up to 100 per cent of their annual basic pay. This applies to Executive Directors and Managing Directors of nationalised banks, as well as Deputy Managing Directors, Managing Directors, and the Chairman of the State Bank of India (SBI).

Updates to Norms

The latest circular revises the norms introduced in August 2018. By integrating stricter criteria, the revised scheme seeks to align incentives with performance while ensuring robust governance and accountability across public sector banks.

This move is seen as part of the government's broader efforts to improve the efficiency and health of the public banking sector.